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CO-OPERATIVE   AND   OTHER  ORGANIZED 

METHODS    OF    MARKETING    CALIFORNIA 

HORTICULTURAL    PRODUCTS 


A  THESIS  ACCEPTED  IN  PARTIAL  SATISFACTION  OF 

THE  REQUIREMENTS  FOR  THE  DEGREE  OF 

DOCTOR  OF  PHILOSOPHY 

AT  THE  UNIVERSITY  OF  CALIFORNIA 


BY 


JOHN  WILLIAM  LLOYD 


1917 


UNIVERSITY  OF  ILLINOIS  STUDIES 

IN  THE 

SOCIAL   SCIENCES 

Vol.  VIII  March,  1919  No.  1 


CO-OPERATIVE  AND  OTHER  ORGANIZED 

METHODS  OF  MARKETING  CALIFORNIA 

HORTICULTURAL  PRODUCTS 


BY 
JOHN  WILLIAM  LLOYD,  Ph.D. 

Professor  of  Olericulture 
University  of  Illinois 


PRICE   SI. 25 


PUBLISHED  BY  THE  UNIVERSITY  OF  ILLINOIS 
URBANA 

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ing at  the  special  rate  of  postage  provided  for  in  section  1103,  Act  of  Oc- 
tober 3,  1917,  authorized  July  31,  1918.] 


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UNIVERSITY  OF  ILLINOIS  STUDIES 

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Vol.  VIII  March,  1919  No.  1 


Board  of  Editors 

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Copyright,  1919 
By  the  University  of  Illinois 


•  ••  •    • 

•  •  •  •    • 

•*  •   •  • 


Co-Operative  and  Other  Organized 

Methods  of  Marketing  California 

Horticultural  Products 

By 
JOHN  WILLIAM  LLOYD,  Ph.D. 


PREFACE 

This  monograph  is  based  on  studies  made  during  a  residence 
of  nearly  two  years  in  California.  The  chief  sources  of  informa- 
tion have  been:  (1)  personal  interviews  with  officials  of  mar- 
keting organizations;  (2)  articles  of  incorporation,  by-laws, 
agreements,  crop  contracts,  and  other  printed  documents;  (3) 
detailed  records  of  Boards  of  Directors  and  other  official  bodies ; 
(4)  files  of  periodicals  published  in  fruit  producing  regions  or 
giving  prominence  to  horticultural  products;  and  (5)  special 
literature  bearing  on  the  subject  (see  Bibliography). 

An  effort  has  been  made  to  give  a  true  picture  of  the  co-opera- 
tive movement  in  California  as  applied  to  the  marketing  of 
horti(!niltural  products.  This  study  was  completed  in  March, 
1917,  and  describes  conditions  as  they  existed  at  that  time.  Since 
then  various  new  organizations  have  been  formed,  transportation 
conditions  and  rates  have  changed  on  account  of  the  war,  and 
the  government  has  greatly  extended  its  participation  in  matters 
pertaining  to  food  distribution.  No  attempt  has  been  made  to 
include  a  discussion  of  these  later  developments,  though  some  of 
them  are  directly  in  line  with  the  possibilities  suggested  near  the 
close  of  this  report. 

The  writer  desires  to  acknowledge  his  indebtedness  to  the  late 
Professor  A.  V.  Stubenrauch  for  suggesting  the  undertaking  of 
this  study  and  for  encouragement  during  its  progress  almost  to 
its  completion;  to  other  members  of  the  faculty  of  the  Univer- 
sity of  California  for  helpful  suggestions;  to  the  officers  and 
managers  of  the  various  marketing  organizations  for  their  cour- 
teous assistance;  especially  to  G.  Harold  Powell,  General  Man- 
ager of  the  California  Fruit  Growers  Exchange,  for  the  privi- 
lege of  examining  all  the  records  in  the  office  of  that  organiza- 
tion; to  C.  B.  Messenger,  Editor  of  the  California  Cultivator, 
for  access  to  early  files  of  the  California  Cultivator  and  the 
Rural  Calif ornian;  and  to  Joseph  F.  Daniels,  Librarian  of  the 
Riverside  Public  Library,  for  access  to  files  of  the  Riverside 
Press  and  Horticulturist  and  the  Riverside  Daily  Press. 

J.  W.  Lloyd 
Urbana,  Illinois 
December,  1918 


CONTENTS 

Introduction 9 

CHAPTEE  I 

Advantages  of  Co-operative  Marketing 13 

how  marketing  costs  have  been  reduced        .        .        .        .  13 

how  distribution  of  the  product  has  been  improved  .        .  20 

how  demand  for  the  product  has  been  increased  ...  23 

Standardization  of  the  product 27 

Protection  of  the  individual,  grower 30 

Purchase  of  supplies 34 

CHAPTER  II 

Fundamental  Principles  of  Co-operative  Marketing  ...  35 

Statement  of  the  principles 35 

I  Conditions  in  the  industry  at  the  time  of  organization        .  37 

impossibility  of  marked  improvements 44 

^Volume  of  product  needed 48 

CHAPTER  III 

J-  Basis  of  Membership 51 

California  Fruit  Agency 53 

Other  attempts  to  combine  growers  and  dealers  ...  65 

CHAPTER  IV 
Financing   the   Organization,    Distribution   of   Benefits,    and 

J*  Basis  of  Voting 74 

^    Financing  the  organization 74 

*?    Distribution  of  benefits 81 

Basis  of  voting 83 

CHAPTER  V 

Some  Essential  Details 87 

)  Affiliation  of  local  organizations 87 

J^  Business  ability  needed 92 

'^Methods  of  sei^ling 95 

If  Loyalty  of  members  and  employees 101 

CHAPTER  VI 

Other  California  Marketing  Organizations 106 

Comparison   of   commercial  marketing  organizations  with 

growers'   co-operative   organizations 110 

An  example  of  government  aid  in  distribution      .        .        .  112 

CHAPTER  VII 

Relation  of  Growers'  Co-operative  Marketing  Organizations  to 

Control  of  Production,  Distribution,  and  Prices     .        .        .  114 

CHAPTER  VIII 

Reducing  the  Cost  to  the  Consumer 123 

CHAPTER  IX 
Applicability  of  California  Co-operative  Marketing  Methods  to 

OTHER  Producing  Regions 128 

Bibliography 133 

Index 138 


INTRODUCTION 

The  permanence  of  horticultural  industries  depends  primarily 
upon  the  successful  marketing  of  the  products.  Many  individual 
horticultural  enterprises  have  failed,  not  because  of  inability  of 
the  operators  to  produce  the  crops,  but  for  lack  of  efficient  mar- 
keting facilities.  When  individual  efforts  at  marketing  have 
failed,  growers  have  been  obliged  either  to  give  up  their  horti- 
cultural pursuits  or  to  co-operate  with  their  feUows  in  the  mar- 
keting of  their  products.  The  greater  the  distance  of  the  grower 
from  his  market,  the  more  helpless  he  has  been  as  an  individual 
in  attempting  to  solve  his  marketing  problems.  It  is  not  sur- 
prising, therefore,  that  California  growers  have  been  leaders  in 
the  development  of  co-operative  marketing  organizations  in 
America. 

A  study  of  the  conditions  which  led  to  the  formation  of  co- 
operative marketing  organizations  in  California,  and  of  the  ac- 
complishments of  these  organizations  should  indicate  the  relative 
advantages  of  co-operative,  as  compared  with  other  methods  of 
marketing.  Furthermore,  the  experiences  of  these  organizations 
in  the  progress  of  their  development  illustrate  certain  principles 
which  appear  to  be  fundamental  to  the  success  of  co-operative 
marketing  enterprises.  A  detailed  consideration  of  these  prin- 
ciples as  exemplified  by  the  experiences  of  California  marketing 
organizations  will  constitute  the  major  portion  of  the  present 
paper. 

Three  methods  of  marketing  California  horticultural  products 
may  be  noted:  (1)  outright  sale  to  speculative  buyers,  (2)  con- 
signment upon  a  commission  basis,  and  (3)  sale  through  a  grow- 
ers' co-operative  marketing  organization.  Each  of  these  methods 
has  characterized  certain  periods  in  the  marketing  of  the  various 
California  products.  In  the  early  eighties  of  the  last  century, 
California  fruit  was  usually  purchased  outright  from  the  grow- 
ers by  speculative  buyers  who  shipped  it  to  a  few  of  the  larger 
markets.  California  fruit  in  the  eastern  markets  was  then  looked 
upon  as  a  luxury  to  be  indulged  in  only  by  the  wealthy,  and  the 


10  INTRODUCTION  [10 

limited  shipments  were  sold  at  exorbitant  prices.  During  this 
period,  the  buyers  paid  good  prices  to  the  growers,  and  at  the 
same  time  made  large  profits  for  themselves.  Within  a  few 
years,  however,  with  increased  production,  the  markets  seemed 
to  be  easily  oversupplied,  and  the  former  buyers  refused  to 
purchase  fruit  from  the  growers,  but  were  -willing  to  handle  it 
upon  a  commission  basis,  in  addition  to  a  fixed  charge  for  pack- 
ing. This  arrangement  relieved  the  shipper  of  all  risk  and  in- 
sured him  a  profit,  but  placed  the  grower  at  the  mercy  of  an 
uncertain  market,  and  finally  resulted  in  such  low  returns  that 
the  entire  fruit  industry  of  the  state  was  threatened  with  ruin. 
The  crisis  was  reached  during  the  financial  panic  of  1893.  For 
a  few  years  previous  to  that  date,  efforts  had  been  made  by 
growers  to  devise  some  better  method  of  marketing  their  prod- 
ucts; and  in  a  few  places  small  local  associations  had  been 
organized.  A  special  impetus  was  given  to  the  formation  of 
fruit  growers'  co-operative  marketing  organizations  in  1893,  par- 
ticularly among  orange  growers  in  the  southern  part  of  the  state. 
The  various  local  organizations  of  orange  growers  became  affili- 
ated, and  in  1895  a  central  organization,  known  as  the  Southern 
California  Fruit  Exchange,  was  incorporated.  This  organiza- 
tion has  been  in  continuous  activity  since  that  date  (though  in 
1905  the  name  was  changed  to  California  Fruit  Growers  Ex- 
change), and  furnishes  the  facilities  by  means  of  which  a  large 
part  of  California's  citrus  fruit  crop  is  marketed. 

Besides  the  citrus  fruit  growers,  producers  of  deciduous  fresh 
fruits,  raisins,  dried  peaches,  walnuts,  almonds,  apples,  berries, 
and  cantaloupes,  have  formed  marketing  organizations  which  are 
at  the  present  time  in  active  operation.  Some  of  the  organiza- 
tions are  general  in  character,  attempting  to  serve  the  needs  of 
the  given  industry  throughout  the  state;  others  have  confined 
their  activities  to  a  given  producing  region  without  regard  to  the 
same  product  in  other  localities. 

The  following  organizations  of  growers  are  concerned  in  the 
marketing  of  California  horticultural  products : 


11] 


INTRODUCTION 


11 


Oalifoenia  Co-operative  Marketing  Organizations 


Name 
General  organizations: 
California  Fruit  Gro^ 
Exchange 


California  Associated 
Raisin  Co. 

California  Walnut  Grow- 
ers Association 

California  Almond  Grow- 
ers Exchange 

California  Peach  Growers 
Locality  organizations: 

Sebastopol  Berry  Grow- 
ers, Incorporated 

Sebastopol  Apple  Grow- 
ers '  Union 

Turlock  Merchants  and 


Growers,  Inc. 


Headquarters 
Los  Angeles 

Years 
Product      in  Op- 
eration 
Citrus  fruits     21^ 

Percentage 
of  Crop 
Handled 

Sacramento 

Deciduous 
fresh  fruits 

16 

dfO 

Fresno 

Raisins 

4 

-5 

80-f 

Los  Angeles 

Walnuts 

1 

7^/ 

San  Francisco 
Fresno 

Almonds 
Dried  peaches 

1- 
1 

80f- 
75 

Sebastopol 

Berries 

8/. 

Sebastopol 

Apples 

6/^ 

Turlock 

Cantaloupes, 

etc. 


In  addition  to  the  above,  the  following  have  filed  articles  of 
incorporation,  and  are  in  process  of  organization:  California 
Prune  and  Apricot  Growers,  Inc.,  California  Associated  Olive 
Growers,  Inc.,  and  Watsonville  Apple  Distributors.^  Mention 
should  also  be  made  of  the  California  Avocado  Association  and 
the  Coachella  Valley  Date  Growers  Association,  organizations 
which  are  looking  after  the  welfare  of  their  respective  industries, 
the  products  of  which  are  not  yet  of  sufficient  volume  to 
warrant  any  attempts  at  co-operative  marketing. 


1  This  study  was  completed  in  March,  1917.     Other  organizations  handling 
California  horticultural  products  have  been  formed  since  that  time. 


CHAPTER  I 

ADVANTAGES  OF  CO-OPERATIVE  MARKETING 

A  study  of  the  accomplishments  of  the  organizations  enumer- 
ated in  the  tabular  statement  on  page  11,  and  of  some  of  their 
predecessors  in  the  same  industries,  indicates  that  growers'  co- 
operative marketing  organizations  handling  California  horticul- 
tural products  are  capable  of : 

1.  Reducing  the  cost  of  marketing. 

2.  Improving  the  distribution  of  the  product. 

3.  Increasing  the  demand  for  the  product. 

4.  Standardizing  the  product. 

5.  Protecting  the  individual  grower. 

HOW  MARKETING  COSTS  HAVE  BEEN  REDUCED 

In  this  discussion,  ''cost  of  marketing '^  is  assumed  to  mean 
the  difference  between  the  price  paid  by  the  jobber  in  the  con- 
suming region  and  that  received  by  the  grower  for  a  given  prod- 
uct. It  includes  packing-house  charges,  transportation,  and 
brokerage,  commission  or  other  form  of  compensation  for  doing 
the  selling.  In  the  early  period  when  the  fruit  was  handled 
principally  by  speculative  buyers  who  purchased  it  outright 
from  the  growers,  this  cost  of  marketing  included  a  large  profit 
to  the  dealer.  When  market  conditions  changed  so  that  large 
profits  were  no  longer  assured,  the  same  firms  continued  to  oper- 
ate as  packers  and  shippers,  charging  the  growers  a  fixed  amount 
for  packing  and  a  commission  for  selling.  This  was  the  method 
in  operation  at  the  time  the  orange  growers  decided  to  organize 
for  the  purpose  of  doing  their  own  marketing. 

One  of  the  most  tangible  results  secured  by  the  orange  growers 
upon  assuming  their  own  packing  and  selling  was  a  marked  re- 
duction in  the  cost  of  packing  as  compared  with  the  charge 
exacted  for  that  service  by  the  firms  who  had  previously  handled 

13 


14  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [14 

the  crop  and  who  continued  to  handle  it  for  growers  outside  the 
organization.  Reports  of  various  associations  of  growers  at  the 
end  of  the  first  season's  operations  following  the  general  move- 
ment toward  organization  in  1893,  gave  definite  evidence  on  this 
point.  At  the  annual  meeting  of  the  Eiverside  Heights  Orange 
Growers  Association,  October  2,  1894,  the  officers  reported  that 
''the  total  expense  per  box  for  packing  the  fruit  .  .  .  was 
29  cents. ' '  ^  The  report  of  F.  M.  Douglass,  Secretary  of  the 
Duarte-Monrovia  Citrus  Association,  July  17,  1894,  stated  that, 
' '  The  charge  to  the  growers  for  packing  the  fruit  and  loading  on 
car  was  but  24  cents  per  box.  Though  the  price  was  small,  it 
proved  sufficient  to  cover  the  expense. ' '  ^  The  previous  season, 
one  of  the  largest  commercial  packers  had  charged  growers  40 
cents  a  box  for  the  packing.^  In  an  address  at  a  meeting  of  the 
Southern  California  Pomological  Society,  at  Pomona,  November 
16,  1894,  T.  H.  B.  Chamblin,  in  reviewing  the  first  year's  opera- 
tion of  the  Exchange  system,*  stated  that,  "Previous  to  the  ad- 
vent of  the  Exchange  system,  it  cost  from  35  to  50  cents  per  box 
to  pick,  pack,  and  haul  to  the  railway.  The  average  was  about 
from  40  to  45  cents.  During  the  past  year  it  has  not  cost  much 
over  28  cents  per  box. ' ' 

Fully  as  favorable  results  were  attained  the  next  season.  Ac- 
cording to  the  Ontario  Record,^  ''Mr.  Adams  [Manager  of  the 
Ontario  Fruit  Association]  states  that  this  year  [1895]  the  ex- 
pense of  packing,  miscellaneous  expenses  and  salaries  [i.e.  cost 
of  operating  the  local  packing-house]  amounted  in  round  num- 
bers to  28  cents  per  box.  .  .  When  the  old  commission  system 
was  the  only  selling  medium,  the  grower  paid  from  35  to  60 
cents  for  packing  alone."  The  costs  of  packing  in  some  of  the 
Riverside  associations  for  the  1894-95  crop  were  as  follows: 
Riverside  Heights  Association,  25.68  cents  per  box;  Brocton 
Square  Association,  26.20  cents  per  box ;  Navel  Orange  Co.,  24-^ 
cents.®    The  same  item  stated  that, ' '  The  average  cost  throughout 

1  Eiverside  Press  and  Horticulturist,  Oct.  6,  1894,  p.  2. 

2  California  Cultivator,  Aug.,  1894,  p.  229. 

3  Eiverside  Press  and  Horticulturist,  Sept.  23,  1893,  p.  2. 
*  Eural  Calif omian,  Dec,  1894,  pp.  635-636. 

5  As  quoted  in  Eiverside  Press  and  Horticulturist,  Aug.  31,  1895,  p.  1. 
«  Eiverside  Press  and  Horticulturist,  Sept.  28,  1895,  p.  2. 


15]  ADVANTAGES  OF  CO-OPERATIVE  MARKETING  15 

the  valley  has  probably  not  gone  above  27  cents,  as  against  35 
paid  to  outside  packers  the  same  season."  At  the  close  of  that 
shipping  season,  Fred  L.  AUes,  in  an  article  entitled,  ' '  California 
Fruit  Exchanges  vs.  The  Commission  System, '  *  ^  stated  that, 
*'In  no  one  thing  has  the  exchange  system  shown  its  value  more 
positively  than  in  the  cost  of  packing  and  marketing  the  fruit. 
It  has  reduced  the  cost  of  packing  from  the  old  commission  sys- 
tem average  of  43  cents  per  box  to  a  present  rate  of  28  cents,  a 
saving  to  the  growers  of  nearly  $200,000  on  packing  alone." 

In  October,  1900,^  the  stockholders  of  the  Riverside  Heights 
Association  ''were  most  enthusiastic  over  the  splendid  showing 
made  the  past  year  .  .  .  and  the  average  cost  per  box  for 
packing  was  271/2  cents  —  lower  than  any  other  association  by 
11/2  cents." 

In  a  circular  issued  by  the  California  Fruit  Growers  Ex- 
change, December  20,  1911,  B.  A.  Woodford,  General  Manager, 
said :  ' '  A  brief  review  or  comparison  of  conditions  as  they  exist 
just  prior  to  the  formation  of  the  Exchange  and  as  they  exist 
to-day  is  interesting.  Then,  the  cost  of  packing  a  box  of  oranges 
and  putting  it  upon  the  car  was  between  40  and  50  cents.  Now, 
the  same  service,  better  done,  costs  on  the  average  30  cents. ' ' 

In  a  public  address  the  same  year,^  Mr.  Woodford  said :  ' '  The 
cost  of  packing  as  compared  with  seventeen  years  ago  has  been 
reduced  to  all  growers  more  than  10  cents  per  box,  a  saving  of 
$2,000,000  annually  on  the  present  output." 

The  low  cost  of  packing  as  conducted  by  the  associations  which 
constitute  the  California  Fruit  Growers  Exchange,  was  due 
mainly  to  two  factors:  (1)  The  elimination  of  the  profits  foi^ 
merly  accruing  under  a  system  of  commercial  packing,  since  all 
operations  are  conducted  upon  a  strictly  co-operative  basis  at 
actual  cost;  and  (2)  the  purchase  of  box  material  and  other 
packing-house  supplies  in  enormous  quantities  for  the  entire  Ex- 
change system  and  their  distribution  to  the  various  associations 
at  actual  cost. 

Some  local  co-operative  associations  of  raisin  growers  which 
had  been  organized  in  the  vicinity  of  Fresno  about  the  time  the 

7  California  Cultivator,  Nov.,  1895,  pp.  381-383. 

8  Biverside  Daily  Press,  Oct.  3,  1900,  p.  5. 

9  Proceedings  Thirty-nvnth  State  Fruit  Growers'  Convention,  p.  89. 


16  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [16 

orange  growers  were  organizing  in  the  southern  part  of  the  state, 
likewise  secured  marked  savings  in  packing  expense.  The  report 
of  W.  F.  Forsey,  Secretary  of  the  Producers'  Raisin  Packing 
Company,  showed  that  in  two  years  this  co-operative  company 
had  ''saved  enough  in  packing,  as  compared  with  the  prices 
charged  by  commission  packers,  to  build  and  equip  their  packing- 
house and  pay  for  the  land"  on  which  it  stood.  In  one  year 
they  had  saved  $6500  in  packing  150  carloads  of  raisins.  They 
''packed  15,410  boxes  Layers  No.  1  of  twenty  pounds  each  at  an 
average  cost  per  box  of  191/4  cents.  The  price  charged  by  the 
commission  packers  is  [was]  32%  cents  for  doing  exactly  the 
same  work.  .  .  They  packed  41,362  fifty  pound  cases  at  an 
average  cost  of  16^^  cents  per  case,  and  the  price  charged  by  the 
commission  packer  is  [was]  25  cents.''  ^^ 

In  the  orange  growers'  organizations,  not  only  the  cost  of 
packing,  but  also  the  cost  of  selling  was  materially  reduced  when 
the  powers  took  their  business  into  their  own  hands.  The  cus- 
tomary commission  charge  seems  to  have  been  10  per  cent  on  the 
gross  sales,  though  7,  8  and  12  per  cent  ^^  have  also  been  men- 
tioned. "The  Exchange  charges  the  growei^  only  actual  cost 
for  .  ,  .  .  selling  the  fruit  which  .  .  .  [in  1895  was] 
about  4  per  cent,  a  saving  of  a  full  $150,000  this  year  to  the 
growers."  ^^  In  a  feature  article"  in  the  Los  Angeles  Herald, 
June  27,  1897,  based  on  data  furnished  by  the  officers  of  the 
Southern  California  Fruit  Exchange,  the  statement  was  made 
that,  "Under  the  Exchange  system  the  cost  [of  selling  the  fruit] 
the  past  season  has  been  only  7%  cents  a  box.  The  old  [com- 
mission] system  of  charging  would  be  about  25  cents  a  box  on 
Navels  and  about  17  cents  a  box  on  seedlings.  Here  is  a  saving 
of  171/2  cents  a  box  on  Navels  and  9i/^  cents  a  box  on  seedlings." 

In  some  of  the  early  reports  regarding  reductions  in  the  cost 
of  marketing  oranges,  the  savings  made  by  the  growers  due  to 
reduced  costs  of  packing  and  of  selling  were  combined  into  one 
item  for  purposes  of  comparison  with  other  methods  of  market- 
ing.    In  a  brief  review  of  the  first  year's  marketing  of  oranges 

10  Pacific  Bural  Press,  Mar.  9,  1895,  p.  146. 

11  California  Cultivator,  Nov.,  1895. 

12  Alles,  Fred  L.,  in  California  Cultivator,  Nov.,  1895. 

13  Los  Angeles  Herald,  June  27,  1897,  pp.  16-17. 


17]  ADVANTAGES  OF  CO-OPERATIVE  MARKETING  17 

under  the  Exchange  system,  W.  E.  Collins  said:^*  ''.  .  .  the 
charge  to  the  grower  for  packing  and  marketing  the  fruit  has 
been  from  25  to  50  per  cent  less  than  the  combined  charge  for 
packing  and  commission  under  the  old  system. ' '  Reports  for  the 
season  of  1894-95^^  ''show  that  the  Redlands  growers  [not  in 
the  Exchange  system]  paid  52  cents  per  box  for  packing  and  sell- 
ing their  fruit,  while  the  same  item  of  expense  in  the  Colton  Ex- 
change was  but  32  cents  —  a  clear  gain  of  20  cents  in  favor  of 
the  Exchange  system. "  In  a  circular  issued  by  a  ' '  committee  of 
the  Orange  Exchanges  comprising  the  Pomona  valley,"  in  the 
fall  of  1896,^^  it  was  stated  that  ''the  expense  of  packing  and 
selling  [had  been]  reduced  to  the  actual  net  cost,  saving  the 
growers  15  to  35  cents  per  box. "  A  circular  issued  by  the  River- 
side Fruit  Exchange  in  the  fall  of  1898  ^^  said:  "The  entire  cost 
of  the  box  material,  packing  and  selling  .  .  .  will  not  ex- 
ceed ...  35  cents  a  box  to  the  grower  [in  the  Riverside 
Exchange,  for  the  season  of  1897-98]." 

The  low  cost  of  selling  instituted  by  the  "Exchange  system" 
in  the  early  days  has  been  consistently  maintained  to  the  present 
time,  even  though  the  service  has  been  vastly  extended  and  im- 
proved. December  20,  1911,  B.  A.  Woodford,  General  Manager 
of  the  California  Fruit  Growers  Exchange,  issued  a  statement 
that  "prior  to  the  formation  of  the  Exchange  .  .  .  the 
growers  paid  the  California  shipper  7  to  10  per  cent  on  the  gross 
proceeds  for  selling  the  fruit.  Now,  a  better  service  is  open  to 
all  growers  for  less  than  3  per  cent."^^  The  annual  reports  of 
the  present  general  manager,  G.  Harold  Powell,  show  that  the 
cost  of  selling  citrus  fruits  through  the  California  Fruit  Growers 
Exchange,  from  1912  to  1916,  has  been  less  than  3  per  cent  on 
the  gross  sales.  In  this  selling  cost  has  been  included  the  cost 
of  maintaining  a  comprehensive  advertising  campaign  each  sea- 
son. The  continuance  of  this  low  cost  of  selling  in  spite  of  the 
greatly  improved  service  has  been  made  possible  by  reason  of  the 

14  Rural  Calif  ornian,  Oct.,  1894,  p.  533. 

15  Rural  Calif  ornian,  Nov.,  1895,  p.  594, 

16  Rural  Calif  ornian,  Oct.,  1896,  p.  413. 

17  Riverside  Daily  Press,  Nov.  16,  1898,  p.  5. 

18  Circular  issued  by  the  California  Fruit  Growers  Exchange,  Dec.  20, 
1911. 


18  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [18 

large  volume  of  business  transacted,  the  thorough  organization 
of  all  departments  of  the  service,  and  the  employment  of  salaried 
agents  in  place  of  brokers  in  the  principal  markets  of  the  country, 
(in  addition  to  reducing  the  costs  of  packing  and  selling  fruit 
for  its  members,  the  California  Fruit  Growers  Exchange  was  the 
principal  factor  in  securing  reductions  in  freight  rates  and  re- 
frigeration charges  on  California  citrus  fruits.  The  orange 
freight  rate  was  reduced  7  cents  per  box  and  the  lemon  rate  21 
cents  per  box.  Based  on  the  output  in  1911,  this  was  equivalent 
to  an  annual  saving  of  over  $1,700,000.^^  Reductions  in  charges 
for  the  various  kinds  of  refrigeration  service  were  secured  from 
time  to  time,  and  resulted  in  further  reducing  the  cost  of  trans- 
portation. Since  these  savings  in  freight  and  refrigeration 
charges  were  available  to  all  shippers  alike,  the  Exchange  has 
been  of  direct  service  to  the  entire  industry  in  this  connection, 
a|id  not  to  its  own  members  alone. ! 

I  The  California  Fruit  Growers  Exchange  has  also  been  able,  in 
its  transactions,  to  reduce  greatly  the  losses  due  to  freight  over- 
charges or  damages  in  transit,  and  to  bad  debts  or  failure  of 
purchasers,  which  losses  might  otherwise  constitute  an  important 
item  in  the  cost  of  marketing.  The  payment  of  freight  over- 
charges is  avoided  by  a  thorough  system  of  auditing  instituted 
by  the  traffic  department  of  the  Exchange.  This  department 
also  secures  and  compiles  the  data  for  the  establishment  of  claims 
against  the  transportation  companies  for  damages  to  fruit  in 
transit  whenever  such  damages  have  occurred.  The  importance 
of  this  service  in  saving  money  for  the  growers  is  indicated  by  a 
statement  in  the  annual  report  of  the  general  manager  of  the 
Exchange  for  the  year  ending  August  31,  1916,  as  follows: 
''There  have  been  presented  to  the  railroads  during  the  year 
11,364  claims,  including  those  for  pilferage,  overcharge,  and  for 
loss  and  damage  in  transit.  These  claims  aggregated  $151,006.01, 
and  during  the  year  $111,557.31  have  been  paid  and  returned  to 
the  shippers.  The  expense  of  this  service  is  included  in  the 
marketing  cost." 

Losses  due  to  bad  debts  and  similar  causes  have  been  prac- 
tically eliminated  by  having  personal  representatives  in  all  the 

19  Proceedings  of  Thirty-ninth  Fruit  Growers'  Convention,  p.  89. 


19]  ADVANTAGES  OF  CO-OPERATIVE  MARKETING  19 

leading  markets,  by  conducting  the  business  on  essentially  a  cash 
basis  [requiring  settlement  in  full  for  every  car  of  fruit  within 
48  hours  after  the  sale  is  consummated] ,  and  by  using  local  banks 
as  depositories  for  funds,  thus  avoiding  the  possibility  of  loss 
due  to  failures  while  checks  were  being  transmitted  to  and  from 
California,.  During  the  year  ending  August  31,  1916,. the  grow- 
ers belonging  to  the  California  Fruit  Growers  Exchange  lost  only 
''$102.73  due  to  bad  debts  and  all  other  causes.  This  equals 
three-eighths  of  one-one  thousandth  of  one  per  cent  of  the  money 
returned  to  California  [by  the  Exchange] .  In  thirteen  years  the 
Exchange  has  returned  to  California  $192,500,000,  and  during 
this  period  the  losses  from  bad  debts  and  from  all  other  [similar] 
causes  have  amounted  to  only  $7,688.56.  .  .  This  business 
represents  transactions  with  2,500  jobbers  in  the  United  States 
and  foreign  countries. "  ^° 

Other  co-operative  marketing  organizations  have  adopted  the 
methods  of  the  California  Fruit  Growers  Exchange  in  reducing 
marketing  costs,  in  so  far  as  these  methods  have  been  applicable 
to  the  business  of  the  respective  industries,  in  their  present  stage 
of  development.  The  organizations  composed  of  local  associa- 
tions operating  their  own  packing-houses  purchase  on  the  best 
possible  terms  the  packing-house  supplies  needed  by  all  their 
members.  The  California  Fruit  Exchange  (handling  deciduous 
fresh  fruits)  has  for  years  had  its  fruit  handled  through  the 
sales  agents  maintained  by  the  California  Fruit  Growers  Ex- 
change in  the  various  markets.  Since  the  heavy  shipments  of 
deciduous  fruits  occur  at  a  season  of  the  year  when  shipments 
of  citrus  fruits  are  comparatively  light,  this  arrangement  has 
been  of  advantage  to  both  Exchanges.  ^The  California  Walnut 
Growers  Association,  by  establishing  more  direct  connections 
with  the  jobbing  trade  than  existed  when  each  local  association 
acted  independently,  has  been  able  to  reduce  the  selling  cost  to 
about  3  per  cent,^^  whereas  the  brokerage  alone  was  formerly 
from  5  to  6  per  cent.  The  California  Walnut  Growers  Associa- 
tion and  the  California  Almond  Growers  Exchange  are  now  co- 
operating in  a  mutual  effort  to  secure  a  reduction  from  the  pres- 

20  AnnvMl  Beport  of  General  Manager,  California  Fruit  Growers  Ex- 
change, Aug.  31,  1916,  p.  4. 

21  Personal  interview  with  C.  Thorpe,  Manager,  Apr.  26,  1916. 


20  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [20 

ent  freight  rate  of  $1.40  per  cwt.  on  walnuts  and  almonds  from 
Pacific  Coast  producing  points  to  eastern  markets.  ] 

HOW  THE  DISTRIBUTION   OF  THE  PRODUCT  HAS  BEEN  IMPROVED 

Before  the  formation  of  growers'  co-operative  marketing  or- 
ganizations in  California,  the  fruit  shipped  to  points  outside  the 
state  was  sent  almost  entirely  to  a  few  of  the  larger  markets,  and 
difficulty  was  experienced  in  disposing  of  the  crops  to  advantage, 
under  the  methods  then  employed,  when  the  total  annual  ship- 
ments of  oranges,  for  example,  were  only  about  4,000  cars.^^ 
The  shipping  was  done  by  a  number  of  firms,  each  acting  inde- 
pendently of  the  others.  The  result  was  that  some  markets  were 
oversupplied  and  others  undersupplied.  This  occasioned  a 
great  disparity  in  prices.  Reports  of  low  supplies  and  high 
prices  in  a  given  market  incited  such  heavy  shipments  to  that 
market  that  the  best  market  might  quickly  be  made  the  poorest 
market.  It  was  even  claimed  that  shippers  sometimes  purposely 
** broke''  certain  markets  in  order  to  dissuade  their  competitors 
from  continuing  to  offer  goods  in  those  markets.  This  was  done 
principally  during  the  period  when  shippers  were  handling  the 
fruit  on  a  commission  basis,  and  the  losses  due  to  low  prices  fell 
upon  the  growers  whose  fruit  was  sacrificed  in  the  competition 
between  different  shippers  for  the  control  of  certain  markets. 
The  shippers  were  sure  of  a  profit  on  the  packing,  and  received  a 
commission  on  the  gross  sales,  so  that  the  losses  resulting  from 
the  unsystematic  method  of  distributing  the  crop  fell  principally 
on  the  growers. 

The  returns  to  the  growers  were  so  low  that  the  cry  of  ' '  over- 
production" was  set  up,  and  in  some  cases  large  areas  of  fruit 
plantations  were  uprooted  because  the  crops  were  netting  the 
growers  less  than  the  cost  of  production.  This  was  especially 
true  of  the  raisin  industry  before  the  formation  of  the  California 
Raisin  Growers '  Association.  Almond  growers  had  also  begun  to 
destroy  their  orchards  for  the  same  reason  shortly  before  co- 
operative marketing  of  their  product  was  instituted.^^  The 
orange  growers  did  not  pull  out  their  orchards,  but  were  greatly 

22  Circular  issued  by  California  Fruit  Growers  Exchange,  Dec.  20,  1911. 

23  Personal  interview  with  J.  B.  Davidson,  of  the  California  Almond 
Growers  Exchange,  Oct.  10,  1916. 


21]  ADVANTAGES  OF  CO-OPERATIVE  MARKETING  21 

concerned  because  of  the  apparent  ease  with  which  the  markets 
were  oversupplied  and  prices  depressed;  and  rumors  of  over- 
production were  rife. 

The  trouble  was  not  due  to  overproduction,  but  to  lack  of  ade- 
quate distribution.  Under  the  marketing  methods  then  in  vogue, 
the  growers  had  no  control  whatever  over  the  distribution  of 
their  products;  the  shipping  firms  dictated  the  time  of  harvest, 
each  usually  striving  to  place  as  much  fruit  as  possible  on  an 
early  market  in  the  hope  of  securing  high  opening  prices,  instead 
of  supplying  the  market  through  as  long  a  season  as  possible, 
and  thus  affording  an  outlet  for  larger  quantities  of  fruit  at  pay- 
ing prices.  Moreover,  the  shipping  firms  confined  their  business 
principally  to  supplying  the  large  cities  with  fruit,  and  made 
little  or  no  attempt  to  develop  markets  in  the  smaller  places. 
Thus  for  years  California  fruits  were  not  generally  distributed 
over  the  country  as  a  whole,  but  their  sale  and  consumption  were 
confined  principally  to  the  large  cities  and  immediately  sur- 
rounding territory. 

One  of  the  first  and  most  important  changes  in  marketing 
policy  instituted  by  the  co-operative  organizations  of  growers 
was  a  widening  of  the  distribution  of  their  products,  both  as  to 
time  and  place.  The  shipping  season  for  each  of  the  various 
products  has  been  extended  as  much  as  the  nature  of  the  com- 
modity and  the  customs  of  the  consumers  will  permit;  and  the 
latter  are  even  being  changed  by  the  systematic  effort  of  growers' 
co-operative  marketing  organizations.  For  example,  the  market- 
ing season  for  lemons  was  formerly  confined  almost  exclusively 
to  the  hot  summer  months;  now  lemons  are  shipped  from  Cal- 
ifornia twelve  months  in  the  year.  Oranges  were  formerly  used 
principally  during  the  winter  and  early  spring,  and  shipping 
ceased  entirely  during  the  summer  months;  now  they  are  han- 
dled the  year  round.  Both  these  results  have  been  brought  about 
largely  through  the  efforts  of  the  California  Fruit  Growers  Ex- 
change in  persistently  calling  the  attention  of  the  consuming 
public  to  the  winter  uses  of  lemons  and  the  summer  uses  of 
oranges. 

The  area  of  distribution  for  their  respective  products  has  been 
greatly  extended  by  nearly  all  the  large  co-operative  marketing 
organizations  of  California  growers,  by  establishing  business  con- 


22  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [22 

nections  in  practically  every  city  in  the  United  States  and  Can- 
ada which  is  large  enough  to  handle  the  given  product  in  carload 
lots.  Thus  many  markets  are  supplied  by  direct  wholesale  ship- 
ments from  California  which  formerly  depended  upon  reship- 
ments  from  the  larger  cities,  often  in  small  lots  and  at  high 
transportation  rates.  Moreover,  these  smaller  cities  now  serve  as 
distributing  centers  from  which  the  products  are  sent  to  the  sur- 
rounding villages  in  a  much  fresher  condition  and  at  less  trans- 
portation expense  than  when  the  goods_  were  distributed  only 
through  the  larger  cities;  and  many  small  places  are  now  sup- 
plied which  were  never  reached  by  the  former  method  of  dis- 
tribution. 

I  It  has  been  largely  through  the  efforts  of  the  growers'  co-oper- 
ative marketing  organizations  that  the  railroads  have  been  in- 
duced from  time  to  time  to  improve  their  transportation  and 
refrigeration  service.  This  has  been  brought  about  partly  as  a 
result  of  conferences  by  representatives  of  the  growers  with  the 
railway  officials,  in  which  it  was  pointed  out  to  the  railway  com- 
panies that  it  was  to  their  advantage  as  well  as  that  of  the  grow- 
ers to  maintain  a  character  of  service  which  would  make  it  pos- 
sible to  place  the  fruit  in  good  condition  in  all  markets  of  the 
United  States  and  Canada.  The  position  of  the  growers  was 
further  emphasized  by  the  establishment  and  collection  of  claims 
for  damages  whenever  it  could  be  shown  that  the  poor  condition 
of  fruit  on  arrival  was  due  to  any  negligence  or  delay  for  which 
the  railway  company  was  responsible.)  The  relations  between 
the  railroads  and  the  fruit  growers  have  really  passed  through 
three  stages.  At  first,  the  railroads  did  as  they  pleased,  regard- 
less of  what  the  fruit  growers  said,  and  the  growers  had  no  re- 
course because  they  were  not  organized.  Then  came  a  period 
during  which  the  organized  fruit  growers  were  almost  contin- 
ually fighting  the  railroad  companies  for  better  service  or  press- 
ing damage  suits  based  on  claims  for  losses  due  to  inefficient  ser- 
vice. The  third  stage  has  now  been  reached,  in  which  the  rail- 
road companies  recognize  that  they  and  the  fruit  growers  have 
mutual  interests;  officials  of  the  leading  fruit  growers'  organ- 
izations are  advised  with  before  new  rulings  or  regulations  affect- 
ing the  shipment  of  their  respective  commodities  are  published ; 
and  certain  classes  of  claims  are  promptly  paid  without  any  court 


23]  ADVANTAGES  OF  CO-OPERATIVE  MARKETING  23 

proceedings.^*  Thus  the  organizations  of  fruit  growers  have 
been  instrumental  in  bringing  about  better  relations  between  the 
railroads  and  the  fruit  industry,  and  in  securing  more  efficient 
transportation  service. 

HOW  DEMAND  FOR  THE  PRODUCT  HAS  BEEN  INCREASED 

The  production  of  California  fruits,  particularly  citrus  fruits, 
has  been  increasing  much  more  rapidly  than  has  the  population 
of  the  United  States.  "The  population  of  the  United  States 
increased  20.7  per  cent  from  1890  to  1900;  the  shipments  of 
citrus  fruits  increased  195  per  cent  during  the  same  period. 
From  1900  to  1910  the  population  increased  21  per  cent,  while 
the  shipments  increased  292  per  cent  during  the  same  period."  ^^ 
Foreign  markets,  particularly  those  of  Canada,  have  been  devel- 
oped to  help  take  care  of  this  increased  production ;  but  the  dis- 
position of  the  greatly  increased  quantity  of  citrus  fruit  has 
been  made  possible  largely  through  an  increase  in  the  per  capita 
consumption  of  oranges  and  lemons  by  the  people  of  the  United 
States.  ''It  is  through  the  increase  in  fruit-eating  habit  of 
the  people  that  the  enormous  increase  in  the  fruit  production  is 
taken  care  of. ' '  ^^  This  increased  per  capita  consumption  of 
oranges  and  lemons  by  the  people  of  the  United  States  is  the 
direct  result  of  systematic  effort  to  that  end  by  the  California 
Fruit  Growers  Exchange.  * '  There  is  no  other  force  as  powerful 
in  increasing  the  use  of  citrus  fruits  as  educational  advertising 
to  consumers.  /For  seven  years  the  [California  Fruit  Growers] 
Exchange  has  been  advertising  .  .  .  continuously,  the  or- 
ganization realizing  that  in  times  of  financial  depression  adver- 
tising is  a  necessity,  and  that  in  times  of  prosperity  it  is  an 
opportunity.  During  prosperous  times,  per  capita  consumption 
of  oranges  and  lemons  can  be  increased,  new  buying  habits  can 
be  formed,  and  new  uses  developed  more  economically  and  more 
easily  than  under  any  other  conditions.     .     .     The  Exchange 

2*  Personal  interview  with  A.  M.  Mortensen,  Traflfic  Manager,  California 
Fruit  Growers  Exchange,  May  16,  1916. 

25  Address  of  G.  Harold  Powell,  before  meeting  of  Western  Fruit  Jobbers 
Association,  Feb.  16,  1915.  Printed  in  The  Western  Fruit  Jobl)er,  April, 
1915. 

26  Address  of  G.  Harold  Powell,  above  cited. 


24  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [24 

advertising  is  increasing  the  use  of  oranges  and  lemons  by  edu- 
cating the  public  to  their  delicious  and  healthful  qualities  by 
repeating  appeals  to  the  appetite,  by  tempting  illustrations  and 
displays,  by  constant  suggestions  of  new  uses  and  new  reasons 
for  using.  .  .  The  opportunity  to  increase  the  consumption 
of  citrus  fruits  is  indicated  by  the  fact  that  the  total  consumption 
of  oranges  during  the  Washington  Navel  season,  including  fruit 
from  California,  Florida,  Porto  Rico  and  other  sources,  is  only 
two  dozen  per  month  for  each  family  of  five  persons,  and  approx- 
imately one-half  dozen  per  month  during  the  Valencia  season. 
Including  imports  the  consumption  of  lemons  is  approximately 
one-half  dozen  per  family  per  month  throughout  the  year. 

''The  national  advertising  of  the  Exchange  has  been  carried 
on  during  the  year  chiefly  through  seventeen  magazines  of  which 
most  are  publications  for  women,  and  by  a  campaign  in  333  daily 
newspapei-s.  In  the  circulation  of  both  magazines  and  news-, 
papers  more  than  450  million  .  .  .  advertisements  have  been 
printed.  In  connection  with  the  educational  campaign  300,000 
orange  and  lemon  recipe  books  were  distributed  on  request. 

''In  addition  to  the  direct  publicity  [advertising  in  magazines 
and  newspapers],  the  Advertising  Department  is  co-operating- 
with  the  wholesale  and  retail  trade  through  the  Dealer  Service 
Department.  .  .  Through  the  Dealer  Service  men  the  Ex- 
change is  constantly  studying  the  retail  and  wholesale  conditions 
that  effect  the  sale  of  citrus  fruits,  and  applying  the  facts  thus 
developed  in  connecting  the  advertising  directly  with  the  fruit 
trade.  Merchants  are  shown  how  to  make  attractive  fruit  dis- 
plays, how  to  sell  a  larger  volume  of  oranges  and  lemons,  how  to 
do  a  more  profitable  business  on  a  lower  margin,  how  to  keep 
fruit  fresh,  minimize  decay  and  wastage,  and  how  to  take  advan- 
tage of  the    .     .     .     national  advertising. 

' '  This  year  the  sales  promotion  work  of  the  dealer  service  men 
involved  more  than  fifteen  thousand  personal  calls  on  retail  fruit 
merchants;  [and]  more  than  one  hundred  and  thirty  thousand 
pieces  of  window  display  material  were  distributed.  .  .  In- 
vestigation .  .  .  developed  the  fact  .  .  .  that  75  per 
cent  of  the  oranges  are  retailed  through  local  grocery  stores. ' '  ^^ 

2T  Anniuil  Report  of  General  Manager,  California  Fruit  Growers  Ex- 
change, Aug.  31,  1916,  pp.  12-13. 


25]  ADVANTAGES  OF  CO-OPERATIVE  MARKETING  25 

' '  The  thing  that  is  of  primary  interest  to  the  producer  and  the 
jobber  is  whether  the  retail  dealer  turns  his  stock  over  in  the 
quickest  possible  time  and  thereby  gives  the  maximum  distribu- 
tion of  fresh  fruit  to  the  consumer  and  at  the  same  time  reduces 
decay  and  waste  to  a  minimum.  .  .  One-half  of  the  consumers 
of  the  country  are  served  by  the  small  town  and  country  mer- 
chants. Oranges  and  lemons  are  self -sellers  if  artistically  dis- 
played. .  .  Dealer  service  aids  in  the  form  of  artistic  window 
displays,  which  make  the  consumer  a  friend  of  the  store  and 
create  a  desire  for  the  fruit. ' '  ^^ 

"The  desire  for  fruit  is  awakened  by  suggestion,  by  seeing 
attractive  displays  of  fresh,  luscious  fruit  in  the  windows  of 
the  store,  on  the  counters,  or  in  other  forms  of  display.  .  .  It 
is  promoted  by  prices  which  bring  the  fruit  within  the  reach  of 
the  average  consumer.  The  retail  dealer,  more  than  any  other 
factor,  creates  this  appetite  appeal,  because  he  comes  in  direct 
contact  with  the  consumer,  and  he  stimulates  or  retards  it  by 
charging  reasonable  or  exorbitant  prices.  .  .  Attractive  dis- 
plays and  quick  sales,  at  a  reasonable  margin  of  profit  on  each 
transaction,  increase  the  per  capita  consumption  and  make  a 
satisfactory  profit  for  the  dealer  at  the  end  of  the  year. ' '  ^^ 

In  making  their  calls  upon  retailers,  the  dealer  service  men 
explained  to  them  * '  how  they  could  make  more  money  by  selling 
a  large  volume  of  fresh  fruit  on  a  low  margin.  .  .  The  secret 
box  of  oranges  or  lemons  was  dragged  out  from  behind  the 
counter  and  displayed  where  people  could  see  the  fruit  and  buy 
while  it  was  fresh.  They  showed  how  this  method  of  selling  would 
prevent  loss  from  decay    .     .     .    and  left-overs. ' '  ^® 

Thus  the  work  of  the  dealer  service  men,  employed  by  the 
California  Fruit  Growers  Exchange,  has  supplemented  the  ad- 
vertising in  magazines  and  newspapers  in  stimulating  the  con- 
sumption of  California  citrus  fruits,  and  has  also  contributed 
directly  to  lowering  the  cost  of  these  fruits  to  the  consumer  by 

28  Address  of  G.  Harold  Powell  before  meeting  of  Western  Fruit  Jobbers 
Association,  Jan.  18,  1916. 

29  Address  of  G.  Harold  Powell  before  meeting  of  Western  Fruit  Jobbers 
Association,  Feb.  16,  1915. 

30  Letter  from  W.  R.  Watson,  Manager  Dealer  Service  Department,  Cali- 
fornia Fruit  Growers  Exchange,  Aug.  17,  1916. 


26  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [26 

encouraging  the  retailer  to  handle  large  volumes  of  fruit  at  a  low 
margin  of  profit  rather  than  a  small  volume  at  a  high  margin. 

Following  the  success  of  the  California  Fruit  Growers  Ex- 
change in  advertising  as  a  means  of  promoting  the  consumption 
of  their  products,  some  of  the  other  marketing  organizations  have 
adopted  essentially  the  same  methods.  The  California  Asso- 
ciated Raisin  Company  commenced  advertising  their  product  in 

1914,  and  spent  $117,452.64  in  connection  with  the  advertising 
campaign  and  other  publicity  work  in  disposing  of  the  1914 
crop.^^  This  was  equivalent  to  spending  $1.64  in  advertising  for 
each  ton  of  raisins  sold,  but  was  looked  upon  as  a  very  good  in- 
vestment,^^ since  it  was  considered  the  direct  cause  of  increasing 
the  sales  of  seeded  raisins  to  bakers  from  750  tons  in  1914  to 
7300  tons  in  1915,^^  and  also  laid  the  foundation  for  future  sales. 
In  the  course  of  the  advertising  campaign  in  connection  with 
selling  the  1915  crop,  advertisements* were  carried  in  348  daily 
newspapers.^*  The  plans  of  the  Company  for  the  year  commenc- 
ing June  1,  1916,  contemplated  the  expenditure  of  $150,000  in 
advertising  (including  full-page  advertisements  in  two  national 
magazines)  and  $100,000  in  publicity  work.  In  over  twenty 
cities  the  Company  maintains  men  the  year  round ;  and  for  sev- 
eral weeks  during  the  fall  has  a  large  additional  force  of  specialty 
men  calling  upon  the  trade,  distributing  window  display  mate- 
rial, demonstrating  raisin  bread,  and  otherwise  giving  publicity 
to  the  raisin  as  a  food  product.^^  It  was  planned  to  *'call  upon 
the  retail  grocers  and  fancy  home  bakers  in  practically  every 
town  of  5,000  population  and  over  throughout  the  country.''^® 

The  keynote  to  the  raisin  advertising  has  been  *' California 
Raisin  Bread,''  and  a  large  demand  for  raisins  to  be  used  in 
bread-making  has  been  created.  For  example,  a  bakery  in  Flint, 
Michigan,  ''within  twelve  days,  built  up  a  business  of  800  loaves 

31  statement  to  Growers;   Eaisin  Settlement,  1914  Crop,  September  30, 

1915.  Sun-Maid  Herald,  Nov.,  1915,  p.  6. 

32  Sun-Maid  Herald,  Dec,  1915,  p.  2. 

33  Sun-Maid  Herald,  Apr.,  1916,  p.  10. 
3*  Sun-Maid  Herald,  July,  1916,  p.  4. 

35  Personal  interview  with  Wylie  M.  Giffen,  President,  California  Asso- 
ciated Raisin  Company,  July  18,  1916. 

36  Sun-Maid  Herald,  July,  1916,  p.  1. 


27]  ADVANTAGES  OF  CO-OPERATIVE  MARKETING  27 

of  California  Eaisin  Bread  per  day,  starting  from  nothing;^' ^^ 
and  after  a  campaign  of  advertising  and  demonstrating  in  Col- 
umbus, Ohio,  it  was  estimated  by  the  bakers  that  the  quantity  of 
raisin  bread  being  consumed  in  that  city  was  15  or  20  times  as 
great  as  before  the  campaign.^^  In  May,  1916,  it  was  estimated 
that  the  Company  was  selling  at  the  rate  of  between  10,000  and 
12,000  tons  of  raisins  per  year  ''exclusively  for  use  in  raisin 
bread."  3« 

The  California  Walnut  Growers  Association  and  the  California 
Almond  Growers  Exchange  also  have  resorted  to  advertising  as 
a  means  of  increasing  the  consumption  and  extending  the  dis- 
tribution of  their  respective  products. 

STANDARDIZATION  OF  THE  PRODUCT 

Standardization  of  the  product  has  been  a  large  factor  con- 
tributing to  the  success  of  the  advertising  campaigns  above  men- 
tioned and  to  the  development  of  markets  for  the  commodities 
in  question.  It  is  impossible  successfully  to  advertise  a  com- 
modity unless  it  has  certain  definite  desirable  characteristics  or 
qualities  which  are  uniformly  present  in  all  the  offerings.  Such 
uniformity  can  be  secured  only  through  standardization  of  the 
product;  and  standardization  of  a  horticultural  product  can  be 
effected  only  by  concerted  action  on  the  part  of  those  who  super- 
vise the  preparation  of  the  product  for  market.  It  is  only  by 
this  means  that  uniformity  can  be  secured  throughout  a  large 
volume  of  product,  and  a  definite  brand  on  a  fruit  package  be 
made  to  mean  always  the  same  thing.  It  is  true  that  standards 
of  grading  and  packing  may  be  established  by  federal  or  state 
legislation,  and  the  enforcement  of  such  acts  vested  in  civil 
authority.  But  such  acts  can  seldom  be  passed  without  the  sanc- 
tion of  the  producers  of  the  commodity  affected,  or  enforced 
without  their  co-operation.  As  a  matter  of  fact,  standardization 
of  the  products  handled  by  growers'  co-operative  marketing 
organizations  in  California  has  usually  preceded  rather  than  fol- 
lowed legislative  enactment ;  and  a  much  more  rigid  and  definite 
standard  can  be  maintained  by  a  co-operative  organization  of 

37  Sun-Maid  Herald,  Dec,  1915,  p.  9. 

38  Sun-Maid  Herald,  Jan.,  1916,  p.  15. 

39  Sun-Maid  Herald,  May,  1916,  p.  1. 


28  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [28 

growers  whose  interests  are  mutual  than  can  ever  be  enforced 
throughout  the  state  by  government  officials. 

Soon  after  the  organization  of  the  citrus  fruit  growers  was 
effected,  a  box  of  a  definite  size  and  shape  was  adopted  as  the 
standard  package  for  oranges  and  another  for  lemons;  and  all 
associations  in  the  organization  were  required  to  pack  their  frait 
in  these  standard  packages  and  no  others.  Three  grades  of  fruit 
were  also  established  and  described.  Later,  the  basis  of  grading 
was  somewhat  modified,  and  after  systematic  advertising  was 
started,  more  complete  descriptions  were  formulated  to  indicate 
the  kind  of  fruit  that  might  be  packed  under  the  advertised 
brands.  Not  only  do  all  the  managers  of  Exchange  packing- 
houses have  the  same  description  as  a  guide,  but  each  is  visited 
every  few  days  by  a  representative  of  the  Field  Department,  one 
of  whose  chief  duties  is  to  promote  as  great  uniformity  as  possible 
in  grading  and  packing  throughout  the  162  local  associations  that 
compose  the  California  Fruit  Growers  Exchange.  By  united 
effort,  the  Exchange  has  been  able  to  so  standardize -the  grading 
that  the  ''Sunkist"  brand  is  now  recognized  throughout  the 
United  States  as  synonymous  with  ' '  uniformly  good  oranges  and 
lemons,"  and  consumers  are  able  to  order  this  brand  over  the 
telephone  without  any  uncertainty  as  to  the  quality  of  the  f iniit 
they  will  receive. 

The  California  Walnut  Growers  Association  has  adopted  def- 
inite regulations  regarding  the  grading,  bleaching  and  inspect- 
ing of  their  product,  and  identical  methods  are  employed  by  all 
the  affiliated  local  associations,  thus  insuring  uniformity  in  the 
output.  It  has  thus  been  possible  to  dispense  with  all  local 
brands,  and  to  market  all  the  first  grade  nuts  under  the  ''Dia- 
mond Brand,"  adopted  by  the  organization.  The  organization 
has  established  a  cracking  test  and  guarantees  that  the  nuts  sold 
as  first  grade  shall  show  at  least  85  per  cent  of  good  meats.  The 
local  associations  make  cracking  tests  of  each  lot  of  nuts  as 
brought  in  by  the  growers ;  then  when  a  car  is  being  loaded,  an 
inspector  sent  out  from  the  central  association  takes  a  sample  of 
nuts  (consisting  of  a  ''double  handful")  from  every  tenth  sack, 
thus  securing  about  twenty-five  samples  from  the  carload.  He 
mixes  all  these  nuts  thoroughly ;  then  takes  out  and  cracks  four 
samples  of  100  nuts  each,  and  reports  to  the  central  office  the 


29]  ADVANTAGES  OP  CO-OPERATIVE  MARKETING  29 

average  percentage  of  sound  meats.  He  also  sends  to  the  office 
a  four-pound  sample  of  the  nuts,  which  is  kept,  together  with 
the  car  number,  until  the  close  of  the  season.  ''Near-grade" 
nuts  are  sold  at  a  definite  discount  for  each  per  cent  they  fall 
below  the  standard  set  for  the  ' '  Diamond  Brand ; ' '  and  still  low- 
er grade  nuts  are  run  through  a  cracker  and  only  the  sound 
meats  are  sold.**'  The  association  is  thus  able  to  market  the  en- 
tire product  of  all  its  growers,  and  to  supply  the  trade  with  a 
product  of  known  quality. 

Similar  methods  of  securing  uniformity  in  their  product  have 
been  adopted  by  the  California  Almond  Growers  Exchange,  and 
their  ''Blue  Diamond  Brand"  represents  a  highly  standardized 
product,  the  reliability  of  which  is  recognized  by  the  wholesale 
trade.  Before  the  formation  of  the  Almond  Growers  Exchange, 
California  almonds  were  looked  upon  as  inferior  to  those  im- 
ported from  Europe ;  but  the  Exchange  has  demonstrated  to  the 
trade  that  the  California  unshelled  almond,  as  now  standardized, 
is  superior  to  the  imported  article.*^ 

The  California  Associated  Raisin  Company  has  featured  a  spe- 
cial grade  of  seeded  raisins  under  the  "Sun-Maid"  brand,  and 
has  depended  largely  upon  the  uniformly  pleasing  quality  of 
this  brand  of  raisins,  together  with  extensive  advertising  and 
other  publicity  work,  to  increase  the  consumption  of  and  demand 
for  raisins  throughout  the  country.  The  success  attending  this 
campaign  has  been  made  possible  because  of  the  uniform  quality 
of  the  raisins  packed  under  this  brand  —  in  short,  because  the 
brand  represents  a  standardized  product. 

Previous  to  the  formation  of  the  Sebastopol  Apple  Growers' 
Union,  there  was  little  uniformity  in  the  grading  or  packing  of 
apples  in  that  locality.  One  of  the  principal  objects  in  organiz- 
ing the  Union  was  to  bring  together  the  products  of  the  numer- 
ous small  orchards  and  standardize  the  pack.*^  This  has  been 
accomplished  by  entirely  eliminating  orchard  packing,  and  han- 

40  Personal  interview  with  C.  Thorpe,  Manager,  California  Walnut  Grow- 
ers Association,  Apr.  26,  1916. 

■*i  Address  of  T.  C.  Tucker,  Manager,  California  Almond  Growers  Ex- 
change, at  Berkeley,  Cal.,  Sept.  18,  1916. 

42  Personal  interview  with  E.  C.  Merritt,  Manager,  Sebastopol  Apple 
Growers'  Union,  July  21,  1916. 


30  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [30 

dling  the  whole  crop  under  one  management  through  the  four 
packing-houses  operated  by  the  Union.  So  successful  has  this 
method  been  in  securing  a  uniform  pack  that  now  the  phrase 
''Fancy  Sebastopol  Gravensteins'^  conveys  a  definite  meaning  to 
the  trade,  and  these  apples  are  eagerly  sought  in  the  markets  of 
Chicago,  New  York,  and  Liverpool. 

Although  it  is  usually  considered  impracticable  to  standardize 
a  horticultural  product  unless  the  grading  and  packing  can  be 
done  at  central  points  by  the  employees  of  an  organization  rather 
than  on  the  ranches  by  the  growers  themselves,  the  marked  suc- 
cess attending  the  efforts  of  the  Turlock  Merchants  and  Growers 
demonstrates  that  such  an  attainment  is  not  impossible,  provided 
proper  instruction  and  supervision  are  given  and  the  growers 
are  sufficiently  mindful  of  their  own  interests  to  follow  the  speci- 
fications that  have  been  mutually  agreed  upon.  The  cantaloupe 
growers  in  the  Turlock  district  have  usually  confined  themselves 
to  small  acreages  of  this  product,  and  the  packing  is  done  for  the 
most  part  by  members  of  the  growers'  families.  Such  a  situation 
is  most  favorable  to  extreme  lack  of  uniformity  in  the  packed 
product;  and  yet  the  co-operative  organization,  by  employing 
expert  inspectors  to  instruct  the  growers  in  grading  and  pack- 
ing, has  been  able  to  put  out  a  uniform  product,  which  has  com- 
manded respect  in  the  nation's  markets  because  of  its  depend- 
able quality.  i, 

PROTECTION  OF  THE  INDIVIDUAL  GROWER 

As  long  as  the  individual  growers  sold  their  crops  directly  to 
speculative  buyers  or  had  them  handled  by  shipping  firms  on  a 
so-called  commission  basis,  each  grower  and  each  community  of 
growers  was  open  to  exploitation  on  the  part  of  the  buyer  or 
shipper.  And  if  the  individual  grower  consigned  his  fruit  to  a 
distant  market,  instead  of  dealing  with  a  buyer  or  shipper,  he 
likewise  was  obliged  to  accept  for  his  fruit  whatever  the  distant 
dealer  saw  fit  to  send  him. 

The  individual  grower,  acting  alone,  has  very  meager  facilities 
for  ascertaining  the  actual  conditions  in  the  markets  of  the  coun- 
try at  a  given  time.  Very  few  growers  have  a  sufficient  volume 
of  product  for  sale  to  warrant  their  incurring  the  expense  of 
procuring  telegraphic  information  regarding  the  condition  of 


31]  ADVANTAGES  OF  CO-OPERATIVE  MARKETING  31 

the  various  markets  at  sufficiently  frequent  intervals  to  be  of  any 
material  service  in  disposing  of  their  products.  Furthermore, 
such  information  as  they  might  secure  by  this  means  could  usu- 
ally be  procured  only  from  dealers  in  the  respective  markets 
who  had  no  personal  interest  in  the  welfare  of  the  grower,  and 
whose  reports  to  the  inquiring  grower  might  be  influenced  in  a 
large  measure  by  their  own  interests.  In  addition  to  this  it 
would  be  impossible  for  each  individual  grower  to  make  a  sys- 
tematic study  of  the  peculiar  demands  of  the  various  markets 
or  to  secure  reliable  information  regarding  the  quantities  of 
supplies  likely  to  be  available  from  domestic  and  foreign 
sources.  In  short,  it  would  be  impossible  for  each  grower  to 
secure  by  direct  means  sufficient  data  to  enable  him  to  determine 
what  his  crop  is  really  worth.  It  is  also  true  that  the  representa- 
tives of  buyers  or  shippers  who  are  sent  out  to  deal  with  the 
growers  are  often  able  to  take  undue  advantage  of  the  grower 
in  any  transaction  involving  the  sale  of  the  latter 's  crop.  A 
man  who  is  dealing  in  fruit  every  day  can  drive  a  much  better 
bargain  from  his  own  standpoint  than  can  a  grower  whose  ex- 
perience in  selling  fruit  is  confined  to  one  crop  each  year.  The 
buyer  would  thus  have  a  marked  advantage  over  the  grower,  by 
reason  of  being  continually  in  practice,  even  if  the  grower  were 
naturally  as  keen  a  business  man  as  the  buyer.  As  a  matter  of 
fact,  it  is  usually  those  men  who  have  a  natural  aptitude  for  bar- 
gaining who  are  engaged  in  buying  fruit  from  growers;  and 
while  there  are  many  growers  who  have  business  instinct,  and 
have  had  business  experience  in  other  fields,  there  are  many 
whose  natural  abilities  lie  in  the  direction  of  the  production 
rather  than  the  merchandising  of  fruits.  On  the  whole,  the 
average  individual  grower,  situated  at  a  distance  from  the  ulti- 
mate market  for  his  product,  is  in  an  extremely  weak  position 
so  far  as  the  selling  of  his  fruit  is  concerned. 

However,  by  combining  their  interests,  and  forming  co-opera- 
tive marketing  organizations,  the  growers  of  various  California 
products  have  been  able  to  change  the  situation  entirely.  At 
relatively  slight  expense  per  member,  or  per  unit  of  fruit  han- 
dled, a  large  organization  can  secure  reliable  information  regard- 
ing the  peculiarities  of  given  markets,  and  the  condition  of  the 
crops,  both  domestic  and  foreign ;  and  can  maintain  during  the 


32  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [32 

marketing  season  a  thoroughly  organized  telegraphic  service  that 
will  enable  it  to  know  the  exact  condition  of  each  market  every- 
day. 

It  is  the  custom  for  the  manager,  or  other  representative,  of 
each  of  the  large  organizations,  to  visit  the  various  markets  at 
least  once  a  year,  to  confer  with  the  ''trade"  and  secure  first- 
hand information  regarding  any  peculiar  requirements  of  a 
given  market.  It  is  not  unusual  for  an  organization  to  send  a 
representative  to  foreign  lands  in  order  to  ascertain  the  condi- 
tion of  given  crops  and  the  probable  extent  of  competition  from 
such  sources.  Telegraphic  service  that  will  give  dependable  in- 
formation regarding  the  exact  condition  of  the  various  markets 
from  day  to  day  can  be  maintained  only  by  such  organizations 
as  have  personal  representatives  in  those  markets.  Probably 
the  most  efficient  service  of  this  character  is  that  of  the  Califor- 
nia Fruit  Growers  Exchange,  which  maintains  salaried  agents 
in  77  of  the  leading  markets.  These  agents  represent  the 
growei^  in  the  selling  of  the  product  and  the  transmission  of 
any  information  that  Avill  be  helpful  to  the  industry.  They 
are  in  constant  touch  with  the  trade,  and  wire  back  to  California 
daily  reports  citing  the  exact  conditions.  These  reports  are 
assembled  in  the  Los  Angeles  office  of  the  Exchange,  and  copies 
are  sent  within  a  few  hours  to  every  local  association  of  the 
growers.  The  California  Fruit  Exchange,  by  special  arrange- 
ment with  the  California  Fruit  Growers  Exchange,  makes  use 
of  the  latter 's  agents  in  the  handling  of  its  crop,  and  secures  the 
same  kind  of  telegraphic  service.  Thus  growers  of  citrus  and 
deciduous  fruits  who  belong  to  the  co-operative  marketing  or- 
ganizations above  mentioned  are  kept  in  close  touch  with  mar- 
ket conditions  throughout  the  country.  Since  this  information 
goes  through  the  central  office  of  the  organization  concerned, 
and  since  this  same  office  has  definite  information  regarding  all 
Exchange  shipments  en  route,  it  is  unnecessary  for  any  ship- 
ments to  be  made  blindly.  All  the  shipments  of  these  two  Ex- 
changes can  be  made  in  a  systematic  manner,  with  a  view  to 
securing  proper  distribution  of  the  entire  product  through  the 
various  markets,  even  though  the  central  office  acts  merely  in 
an  advisory  capacity,  and  the  ultimate  decision  regarding  the 


33]  *  ADVANTAGES  OF  CO-OPERATIVE  MARKETING  33 

destination  of  each  particular  carload  of  fruit  rests  with  the 
local  association  that  loaded  the  car. 

Thus  the  likelihood  of  oversupplying  certain  markets,  while 
others  are  left  undersupplied,  is  greatly  reduced.  Further- 
more, if  supplies  from  other  sources  depress  a  given  market, 
cars  originally  intended  for  that  destination  can  be  diverted 
to  other  markets,  even  after  arrival  and  inspection.  The  pres- 
ence of  the  personal  representatives  of  the  growers  in  the  various 
markets  to  detemiine  the  condition  of  the  fruit  upon  arrival 
and  wire  for  instructions  in  case  of  a  depressed  market,  greatly 
facilitates  the  expeditious  handling  of  the  fruit,  and  avoids 
severe  losses  that  might  otherwise  occur.  If  the  fruit  were 
being  handled  through  brokers  —  who  are  essentially  represen- 
tatives of  the  buyers  rather  than  of  the  sellers  —  there  would 
be  no  incentive  for  an  agent  to  advise  diversion  if  he  could 
possibly  sell  the  car  by  offering  it  at  a  greatly  reduced  price, 
for  if  the  car  were  diverted  from  his  market,  he  would  receive 
no  brokerage.  On  the  other  hand,  the  compensation  of  the 
salaried  agents  of  the  Exchange  does  not  depend  upon  the  num- 
ber of  cars  sold  in  a  given  market,  but  upon  their  ability  to 
assist  intelligently  in  that  distribution  of  the  product  which 
will  yield  to  the  growers  the  highest  average  returns.  Thus 
the  Exchange  growers  are  protected  from  the  low  price  that 
might  ensue  from  an  inadequate  method  of  distribution. 

In  addition  to  this  protection,  the  individual  grower  is  pro- 
tected from  any  severe  loss  in  case  certain  cars  of  fruit  should 
deteriorate  in  transit  or  for  any  reason  be  sold  at  a  lower  figure 
than  the  average  price  for  which  fruit  of  the  same  grade  was 
selling  during  the  same  period;  for  all  the  fruit  of  the  same 
grade  contributed  by  the  different  growers  in  a  given  local 
association  during  the  same  period  is  pooled,  and  each  grower 
receives  for  his  fniit  the  average  net  returns  for  the  period. 
The  element  of  chance  involved  in  individual  shipments  of  per- 
ishable fruits  to  distant  markets  is  thus  eliminated.  In  the  case 
of  the  less  perishable  products  which  are  harvested  within  a 
limited  period,  but  for  which  the  marketing  season  may  extend 
over  a  considerable  length  of  time,  it  is  customary  to  make  only 
one  pool  for  the  whole  season  and  to  place  in  the  same  pool 
not  merely  the  product  of  a  given  local  association,  but  the 


34  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [34 

pix)duct  of  all  the  associations  which  compose  the  general  or- 
ganization. Thus  no  matter  at  what  time  during  the  season 
a  given  growers'  product  is  sold,  he  receives  the  same  price  for 
the  same  grade  as  does  every  other  grower  in  the  organization.'*^ 
This  eliminates  the  element  of  speculation  and  assures  to  each 
grower  the  average  price  for  the  season. 

PURCHASE  OF   SUPPLIES 

In  addition  to  performing  its  function  as  a  marketing  agent, 
a  co-operative  organization  of  growers  may  serve  its  members 
by  acting  in  the  capacity  of  purchasing  agent  in  securing  or- 
chard or  other  supplies  needed  in  large  aggregate  quantities  by 
the  growers.  The  chief  advantages  of  such  purchases  are  that 
by  purchasing  in  large  quantities  under  contract,  the  organi- 
zation is  able  to  secure  the  goods  at  lower  prices  than  could  one 
individual;  and  that  because  of  the  large  quantities  purchased, 
the  organization  can  afford  to  take  time  and  incur  expense  to 
investigate  thoroughly  the  sources  of  supply  of  a  given  article 
and  the  relative  merits  of  different  offerings  before  placing  its 
orders,  thus  insuring  the  grower  against  inferior  quality  or  ex- 
orbitant prices.  An  additional  advantage  is  the  ability  of  an 
organization  to  secure  the  goods  needed  in  times  of  scarcity  or 
emergency.  For  example,  during  the  freeze  of  1913,  the  Fruit 
Growers  Supply  Company,  a  subsidiary  organization  of  the  Cal- 
ifornia Fruit  Growers  Exchange,  was  able  to  secure  oil  in  enor- 
mous quantities  and  on  extremely  short  notice  for  operating  the 
orchard  heaters  belonging  to  its  members.  Except  for  the  es- 
tablished connections  and  prompt  action  of  this  organization,  the 
loss  to  the  citrus  fruit  growers  from  frost  injury  would  have 
been  much  greater  than  it  was. 


*3  The  placing  in  one  pool  of  the  entire  product  of  a  large  organization 
composed  of  a  number  of  locals  is  possible  only  where  the  product  is  of  such 
a  nature  that  there  are  no  material  differences  in  the  quality  or  finish  of  the 
graded  product,  due  to  differences  in  soil,  climate,  or  methods  of  culture. 
Walnuts,  or  almonds  from  different  localities  may  readily  be  pooled,  but  not 
oranges  or  lemons. 


CHAPTER,  II 

FUNDAMENTAL  PRINCIPLES  OF  CO-OPERATIVE 
MARKETING 

The  results  attained  by  certain  co-operative  marketing  organ- 
izations in  California  show  plainly  that  such  organizations  are 
capable  of  securing  for  the  grower  marked  advantages  by  rea- 
son of  reducing  the  cost  of  marketing,  improving  the  distribu- 
tion and  increasing  the  consumption  of  the  given  commodity, 
standardizing  the  product,  protecting  the  individual  against 
losses,  and  economizing  in  the  purchase  of  supplies.  Nevertheless, 
the  experiences  of  these  organizations  during  the  process  of 
their  evolution,  and  of  other  organizations  that  have  been  at- 
tempted from  time  to  time,  indicate  with  fully  as  great  certainty 
that,  in  order  adequately  to  serve  their  purpose  and  continue 
in  successful  operation,  it  is  essential  that  certain  fundamental 
principles  be  observed  in  their  organization  and  management. 
While  certain  organizations  may  continue  with  apparent  success 
for  a  time,  and  others  may  attain  a  limited  degree  of  success  for 
a  still  longer  time  without  conforming  to  all  these  principles, 
there  is  likely  to  be  a  fairly  close  relation  between  the  degree 
of  success  attained  and  the  extent  to  which  the  principles  al- 
luded to  are  observed.  These  principles  may  be  stated  as  fol- 
lows: 

1.  Organization  for  marketing  purposes  can  be  most  readily 
effected  when  conditions  in  the  given  industry  are  such  that  the 
need  of  improvement  is  quite  generally  apparent  to  those  en- 
gaged in  the  industry. 

.2.  Unless  at  the  time  of  organization,  the  conditions  in  the 
industry  are  so  unsatisfactory  that  striking  improvements  are 
possible  early  in  the  life  of  the  organizatiolti^  the  organization 
itself  is  likely  to  die  from  inertia  or  succumb  to  attacks  from 
outside  interests. 

35 


36  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [36 

3.  At  the  time  a  local  organization  undertakes  to  handle  a 
crop,  there  must  be  a  sufficient  volume  of  one  product  or  closely 
allied  products  represented  by  the  membership  to  enable  ship- 
ments to  be  made  in  carload  lots  and  to  effect  a  sufficient  aggre- 
gate saving  in  the  cost  of  marketing  to  more  than  counter-bal- 
ance the  expense  of  operation. 

4.  The  organization  must  be  composed  of  persons  whose 
interests  are  similar.  Membership  in  a  growers'  organization 
should  usually  be  limited  to  actual  growers  of  the  crop  to  be 
marketed. 

5.  Definite  provision  must  be  made  for  financing  the  business 
of  the  organization.  > 

6.  The  benefits  accruing  from  membership  in  the  organiza- 
tion should  be  distributed  among  the  members  in  proportion 
to  the  value  of  the  products  handled  for  each. 

7.  In  a  properly-constituted  growers*  co-operative  marketing 
organization,  it  makes  little  difference  whether  the  voting  power 
is  based  upon  individuals  (one-man,  one-vote),  volume  of  prod- 
uct, or  shares  of  stock, 

8.  For  the  purpose  of  marketing  the  product  of  a  large  hor- 
ticultural industry,  an  affiliation  of  local  organizations  is  pref- 
erable to  a  single  large  organization  made  up  directly  of  indi- 
vidual growers.  In  such  an  affiliation,  the  identity  of  each  local 
should  be  preserved  and  its  interests  fully  represented  in  the 
central  organization. 

9.  Each  organization  must  possess  —  represented  either  in 
its  membership  or  its  employees  —  a  degree  of  administrative 
ability  and  business  acumen  commensurate  with  the  volume  of 
the  business  to  be  transacted  and  the  intricacy  of  the  problems 
to  be  solved. 

10.  The  details  of  handling,  selling,  and  distributing  the 
crop  must  be  adapted  to  the  nature  and  volume  of  the  product. 

11.  Loyalty  of  the  individual  members  and  mutual  confi- 
dence among  all  factors  in  the  organization  are  absolutely  es- 
sential to  the  permanent  success  of  any  co-operative  enterprise. 

These  principles  will  now  be  considered  somewhat  in  detail. 
The  remainder  of  the  present  chapter  and  the  three  succeed- 
ing chapters  will  be  devoted  to  this  phase  of  the  subject. 


37]      FUNDAMENTAL  PRINCIPLES  OF  CO-OPERATIVE  MARKETING        37 
CONDITIONS  IN  THE  INDUSTRY  AT  TIME  OP  ORGANIZATION 

Organization  for  marketing  purposes  can  he  most  readily 
effected  when  conditions  in  the  given  industry  are  such  that  the 
need  of  improvement  is  quite  generally  apparent  to  those  en- 
gaged in  the  industry. 

As  long  as  growers  as  individuals  are  receiving  satisfactory 
returns  for  their  products,  there  is  no  particular  incentive  for 
them  to  combine  with  their  neighbors  for  marketing  purposes. 
Some  special  difficulty  which  he  is  powerless  to  overcome  is 
usually  necessary  to  induce  an  American  farmer  to  depart  from 
his  individualistic  tendencies  and  join  forces  with  his  companions 
in  a  common  cause.  Prices  below  the  cost  of  production,  fre- 
quent "red  ink'*  returns  in  the  case  of  perishable  products, 
accumulation  of  unsold  products,  depreciation  of  property 
values,  and  threatened  financial  disaster  have  characterized  the 
conditions  which  led  to  the  formation  of  some  of  the  co-operative 
marketing  organizations  in  California.  This  was  true  of  the 
citrus  fruit  industry,  the  deciduous  fresh  fruit  industry,  the 
raisin  industry  at  two  different  periods,  the  dried  peach  indus- 
try, and  the  almond  industry.  Less  disastrous,  though  suffi- 
ciently trying,  conditions  prevailed  among  the  walnut  growers, 
Turlock  cantaloupe  growers'  and  Sebastopol  berry  growers  im- 
mediately preceding  the  formation  of  their  respective  organiza- 
tions. Attempts  to  start  organizations  for  marketing  the  prod- 
ucts of  a  given  industry  at  a  time  when  that  industry  was  en- 
joying a  period  of  prosperity,  have  usually  been  unsuccessful. 
In  any  case  the  difficulties  of  securing  membership  and  perfect- 
ing the  organization  are  much  greater  in  times  of  prosperity 
than  of  depression. 

To  illustrate  the  circumstances  that  gave  rise  to  some  of  the 
organizations,  the  following  may  be  cited : 

In  the  citrus  industry  the  conditions  had  been  becoming  worse 
and  worse,  aiid  the  returns  to  the  grower  lower  and  lower  until 
the  season  of  1892-3,  when  about  half  the  shipments  of  the  season 
resulted  in  "red  ink."^  Before  the  next  crop  was  ready  to 
harvest,  the  growers  organized,  feeling  that  such  a  course  was 

1  Statement  of  C.  D.  Adams,  Upland,  Cal.,  in  personal  interview.  May  15, 
1916. 


38  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [38 

the  only  thing  that  would  save  the  citrus  industry  from  utter 
ruin. 

In  a  circular  issued  by  a  ''Committee  of  the  Orange  Exchanges 
comprising  the  Pomona  Valley, "  in  the  fall  of  1896,  the  following 
statements  were  made:  ^  ''Beginning  with  1890,  when  the  vol- 
ume of  our  crop  was  only  nominal  as  compared  with  the  present 
one  [1896],  we  find  an  unequal  distribution  of  returns  from  the 
different  commission  firms.  This  inequality  increased  in  1891, 
and  more  so  in  1892,  but  in  each  case  the  average  price  decreased, 
so  that  in  the  season  of  1893  not  only  did  growers  have  returns 
from  100  cents  per  box  to  nothing,  but  many  actually  had  to  pay 
money  in  addition  to  their  entire  crops  of  fiTiit  for  the  privilege 
of  marketing  them,  and  instead  of  revenue  a  deficit  was  the 
result. 

"Had  this  state  of  affairs  continued,  bankruptcy  was  inevi- 
table for  every  orange  grower.  Forced  by  necessity,  many  of  the 
leading  growers  held  meetings  and  conventions  where  these  mat- 
ters were  discussed,  which  terminated  by  the  forming  of  Associ- 
ations and  Exchanges  on  the  co-operative  plan.  That  this 
movement  has  been  successful,  can  be  attested  by  every  grower 
who  became  a  membqr,  and  its  benefits  are  admitted  by  all  others. 
It  at  once  gave  every  member  a  fair  average  return  for  his  crop 
and  no  deficit." 

"The  [citrus]  fruit  growers  .  .  .  discovered  that  the 
commission  men  in  sharp  competition  with  each  other,  were  flood- 
ing certain  markets  with  fruit  while  others  were  bare,  and  when 
natural  congestion  followed  ...  the  commission  men  began 
to  belabor  one  another,  using  the  fruit  growers  as  clubs  with 
which  to  beat  their  business  rivals.  ...  It  was  absolutely 
necessary  to  change  the  system  of  marketing  the  crop  or  dig  up 
the  orange  trees. ' '  ^ 

^  "The  commission  houses  grew  strong,  prosperous  and  ambi- 
tious .  .  .  each  desiring  to  .  .  .  monopolize  the  Califor- 
nia trade.  .  .  .  Their  rivalry  grew  sharp  and  reckless  of  the 
interests  of  the  consignor  and  his  profits  grew  less  and  less,  till 

2  As  quoted  in  Bural  Calif  omian,  Oct.,  1896,  p.  413. 

sAlles,  Fred  L.,  ''California  Fruit  Exchanges  vs.  The  Commission  Sys- 
tem."    California  Cultivator,  Nov.,  1895,  pp.  381-383. 


39]      FUNDAMENTAL  PRINCIPLES  OF  CO-OPERATIVE  MARKETING        39 

.     .     .     losses  began  to  figure  in  the  returns,     .     .     .     Such  was 
the  situation     .     .     .     from  eight  to  six  years  ago. "  * 

/^''The  most  disastrous  year  .  .  .  that  the  citrus-fruit  in- 
dustry in  California  has  ever  experienced  was  1892-3.  .  .  . 
As  a  result  of  this  failure  of  speculative  shippers  to  sell  the 
year's  crops  at  fair  prices  ...  a  convention  of  growers 
assembled  ...  in  Los  Angeles  on  the  4th  of  April,  1893. 
.  .  .  Following  the  recommendation  of  this  convention  of 
growers,  organization  of  associations  and  district  exchanges  was 
effected  in  all  the  principal  citrus-fruit  districts.  '  '^ 

' '  The  panic  year  of  1893  hit  the  orange  growers  hard.  Thou- 
sands of  statements  came  from  eastern  commission  houses  show- 
ing, in  red  ink,  that  the  fruit  consigned  to  them  had  been  dis- 
posed of  for  less  than  the  amount  of  the  freight  and  selling 
charges.  As  a  consequence  the  growers  that  year  turned  their 
backs  upon  the  commission  merchants  and  speculators,  organ- 
ized the  California  Fruit  Growers  Exchange  and  proceeded  to 
take  the  marketing  of  their  fruit  into  their  own  hands. ' '  ^ 

Preceding  the  formation  of  the  California  Fresh  Fruit  Ex- 
change,^ the  conditions  in  the  deciduous  fresh  fruit  industry 
were  somewhat  similar.  "Frequently  the  year's  returns  failed 
to  pay  the  year's  expenses.  Mortgages  increased  until  the  banks 
refused  to  lend,  and  discouragement  approached  desperation  in 
its  intensity.  Men  found  themselves  possessed  of  debt-laden 
orchards  and  vineyards  and  without  the  means  of  giving  them 
proper  care. ' '  ^  During  this  period  many  fruit  growers  gave 
up  operating  their  own  ranches  and  rented  them  to  Orientals, 
because  they  could  not  themselves  make  any  money  from  the 
growing  of  fruit  under  the  existing  conditions.® 

*'In  the  Fall  of  1900,  a  State  Convention  of  fruit  growers  was 

*Hoag,  I.  N.,  *' Marketing  Citrus  Fruits. '^  Eural  Calif omian^  Mar.,  1898, 
pp.  54,  55. 

5  Cyclopedia  of  American  Agriculture,  Vol.  IV,  p.  265. 

6  Woehlke,  Walter  V.,  ' '  In  the  Orange  Country. ' '  Suiisct  Magazine,  Mar.,. 
1911,  pp.  251-264. 

7  The  name  was  lat«r  changed  to  California  Fruit  Exchange. 

^A  Brief  History  of  the  Deciduous  Fruit  Industry  of  California,  pub- 
lished by  the  California  Fruit  Exchange,  Jan.,  1913,  p.  9. 

9  Address  of  J.  L.  Nagle,  Manager,  California  Fruit  Exchange,  at 
Berkeley,  Cal.,  Dec.  11,  1916. 


40  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [40 

held  at  Fresno,  under  the  auspices  of  the  State  Board  of  Hor- 
ticulture. The  question  of  'Marketing  Fruit'  was  on  the  pro- 
gram for  discussion.  At  all  of  the  annual  Fruit  Growers'  Con- 
ventions of  the  preceding  years,  this  same  subject  of  'Market- 
ing' had  been  an  issue  of  importance.  At  the  convention  of  the 
previous  year  a  statement  had  been  presented  showing  the  re- 
turns of  a  typical  foot-hill  fruit  ranch  in  one  of  the  most  cele- 
brated districts  of  the  State  for  that  season.  The  total  returns 
for  something  over  twenty  thousand  boxes  of  peaches,  pears, 
and  plums,  partly  sold  for  cash  to  a  dealer,  and  partly  sent  East 
on  commission  by  the  same  dealer,  averaged  less  than  twenty-two 
cents  per  package. 

''This  twenty-two  cents  had  to  pay  (as  far  as  it  would  go), 
for  labor,  farm  supplies,  and  equipment,  water  for  irrigating, 
box  lumber,  paper,  nails,  etc.  .  .  Ensuing  discussion  revealed 
that  this  was  not  an  exceptional  case.  It  was  merely  typical  of 
existing  conditions  among  a  large  proportion  of  the  'merely 
growers. ' 

"At  the  Fresno  meeting  of  1900  the  discussion  on  the  subject 
of  'Marketing'  developed  an  interest  of  unusual  intensity.  .  . 
The  result  was  the  appointment  of  a  committee  clothed  with 
power  to  call  a  meeting  early  in  the  following  year. 

"This  meeting  .  .  .  was  held  .  .  .in  the  City  of 
Sacramento,  on  the  15th  of  January,  1901.  .  .  Earnest  de- 
liberation resulted  in  the  formulation  of  a  set  of  by-laws"  and 
the  appointment  of  an  executive  committee  "with  authorization 
to  organize  the  [California  Fresh  Fruit]  Exchange.  "^° 

In  the  Seventh  Biennial  Report  of  the  State  Board  of  Horti- 
culture (1899-1900)  appeared  a  "Review  of  the  Raisin  Indus- 
try," furnished  by  M.  T.  Kearney,  former  president  of  the  Cali- 
fornia Raisin  Growers'  Association.  It  stated  that  for  five  years 
prior  to  the  panic  of  1893  raisins  had  been  sold  by  growers  in 
the  field  at  an  average  of  five  cents  per  pound.  From  that  time 
till  1897  the  price  decreased  until  it  was  as  low  as  %  cent  per 
pound,  and  farmers  fed  raisins  to  their  horses,  in  place  of  bar- 
ley. In  Fresno  County  alone  20,000  acres  of  vineyard  were 
uprooted. 

^0  A  Brief  History  of  the  Deciduous  Fruit  Industry  of  California,  pp. 
10-11. 


41]      FUNDAMENTAL  PRINCIPLES  OF  CO-OPERATIVE  MARKETING        41 

''Much  of  this  demoralization  in  prices  was  due  to  a  system 
of  shipping  raisins  on  consignment  to  Eastern  brokers.  .  .  To 
place  the  industry  on  a  paying  basis,  the  farmers  organized  them- 
selves into  the  Raisin-Growers'  Association.  .  .  The  move- 
ment was  an  entire  success  the  first  year, ' '  and  prices  advanced 
to  2%  cents  per  pound  in  1898.  ''The  success  of  their  efforts 
in  1898  induced  them  to  reorganize  again  for  1899  and  1900, 
and  assisted  by  the  fact  of  there  being  a  short  crop  in  1899 
.  .  .  they  were  enabled  to  advance  their  prices  to  an  average 
of  41/^  cents  per  pound. "  " 

The  conditions  obtaining  in  the  raisin  industry  prior  to  this 
organization  of  the  growers  are  further  illustrated  by  facts  men- 
tioned by  Wylie  M.  G-iffen,^^  president  of  the  California  Associ- 
ated Raisin  Company.  Mr.  Giffen  took  up  his  residence  in  the  Fres- 
no district  twenty-eight  years  ago.  At  that  time  the  raisin  crop 
was  relatively  small  and  prices  high.  Speculators  usually  bought 
the  crop.  A  few  years  later  raisins  became  more  abundant,  and 
the  buyers  manipulated  the  market.  They  would  contract  with 
the  growers  to  take  their  product  at  a  specified  price.  If  the 
market  advanced,  the  growers  delivered  their  raisins  at  the  con- 
tract price;  but  if  it  declined,  the  buyers  forced  them  to  accept 
a  lower  price  or  stand  the  expense  of  a  suit,  which  usually  would 
have  cost  more  than  the  difference  in  price  of  the  raisins,  in  the 
case  of  a  small  grower.  When  the  hard  times  occurred  in  1893, 
the  packers,  who  had  been  handling  the  crop,  refused  to  buy, 
but  were  willing  to  handle  the  raisins  on  commission.  Under 
this  arrangement  the  growers  sometimes  received  II/2  cents  per 
pound  and  sometimes  "red  ink.''  This  continued  for  a  few 
years,  and  the  whole  raisin  country  became  nearly  bankrupt. 
The  depreciation  in  property  values  was  so  great  that  Mr.  Giffen 
bought  a  vineyard  of  20  acres  at  $50  per  acre,  in  a  location 
where  six  or  eight  years  before  the  bare  land  would  have  sold 
for  $125,  and  such  a  vineyard  for  about  $400  per  acre.  He  also 
bought  a  quarter  section  of  land  for  $11,000,  the  buildings  on 
which  had  cost  more  than  that  sum.  Banks  held  mortgages  on 
vineyard  property,  but  would  not  foreclose  because  they  would 
lose  money  by  so  doing. 

11  Seventh  Bien.  Bep.  Cat.  State  Board  of  Hort.,  pp.  39,  40. 

12  Personal  interview,  July  18,  1916. 


42  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [42 

The  organization  which  started  to  handle  the  raisin  crop  in 
1898,  known  as  the  California  Raisin  Growers'  Association,  con- 
tinued until  1904.^^  Then  there  was  a  period,  with  no  general 
organization  of  the  growers,  during  which  the  packers  handled 
the  crop  as  they  saw  fit.  The  conditions  during  this  period  were 
thus  described  by  Walter  V.  Woehlke :  ^*  '  *  Two  hundred  miles 
north  of  the  citrus  belt  in  the  San  Joaquin  Valley  lies  a  compact 
district  which  supplies  more  than  half  the  raisins  consumed  in 
the  United  States.  Here,  also,  large  buildings  filled  with  costly 
machinery  are  in  operation.  .  .  But  these  buildings  and  their 
contents  do  not  belong  to  the  growers;  they  are  the  property  of 
individuals  and  corporations,  and  they  are  operated  solely  for 
the  pockets  of  these  individuals  and  companies,  with  no  regard 
for  the  welfare  of  the  producer.  The  California  orange-growers, 
owning  the  appliances  for  preparing  their  fruit  for  the  market, 
are  prosperous  and  smile.  The  California  raisin-growers,  pay- 
ing annual  tribute  to  the  firms  operating  the  packing-houses  for 
profit,  are  unable  to  make  the  product  of  their  fertile  acres  pay 
expenses.  .  .  Co-operation  saved  the  citrus  men  from  the  fate 
of  the  raisin-growers." 

Following  this  second  period  of  depression  in  the  raisin  indus- 
try, a  new  organization  was  formed  in  the  spring  of  1913  and 
commenced  business  at  a  time  when  the  unsold  portion  of  .the 
1912  crop  still  remaining  in  the  hands  of  the  growers  amounted 
to  about  35,000  tons.  This  was  the  California  Associated  Raisin 
Company.  It  undertook  the  handling  of  this  carrj^-over  as  well 
as  the  new  crop  coming  on,  and  has  continued  as  the  principal 
factor  in  marketing  the  California  raisin  crop  since  that  date.) 

In  the  dried  peach  industry  the  price  paid  the  growers  for 
the  product  kept  getting  lower  and  lower  until  in  1915  it  was 
only  21/2  cents  per  pound.  This  was  approximately  one  cent 
below  the  average  cost  of  production.  Low  prices  were  due  to 
the  fact  that  the  packers  speculated  with  the  crop,  and  influ- 
enced prices  to  their  own  advantage  whether  buying  or  selling. 
They  would  tell  the  grower  that  there  was  not  much  demand  for 

13  The  causes  which  led  to  the  disruption  of  this  organization  will  be  con- 
sidered under  another  heading  (see  pp.  67-71). 

14  Woehlke,  Walter  V.,  "In  the  Service  of  Quality.''  TJw  Outloolc,  Oct.  23, 
1909,  pp.  417-427. 


43]      FUNDAMENTAL  PRINCIPLES  OF  CO-OPERATIVE  MARKETING        43 

peaches,  and  tell  the  jobber  that  the  crop  was  very  short.^^  The 
growers  rebelled  against  this  treatment,  and  at  a  mass  meeting 
in  August,  1915,  appointed  a  committee  of  five  to  investigate 
conditions.  Subsequent  meetings  were  held,  a  membership  cam- 
paign conducted,  the  ''California  Peach  Growers"  incorporated, 
and  business  commenced  by  the  new  organization  in  May,  1916. 
As  in  the  case  of  the  Associated  Raisin  Company,  one  of  their 
first  acts  was  to  take  charge  of  the  marketing  of  the  carried-over 
product  from  the  preceding  year.  They  have  also  successfully 
handled  the  1916  crop. 

Preceding  the  formation  of  the  California  Almond  Growers 
Exchange  in  1910,  the  almond  crop  had  been  handled  almost 
entirely  by  a  few  San  Francisco  dealers  whose  principal  business 
was  the  handling  of  dried  fruits.  Although  local  associations 
had  previously  been  formed  for  the  purpose  of  pooling  the  crop 
of  given  localities  and  inviting  bids  from  dealers,  the  desired 
results  were  not  attained,  for  the  dealers  would  agree  among 
themselves  and  only  one  would  bid  for  the  crop  of  a  given  asso- 
ciation.^^ Prices  kept  getting  lower,  until  the  almonds  were 
being  sold  for  less  than  the  average  cost  of  production,  and 
growers  had  begun  to  grub  out  their  orchards.  At  this  junc- 
ture, the  Almond  Growers  Exchange,  an  affiliation  of  the  local 
associations,  was  formed.  Since  that  time  the  growers  have 
made  good  profits  from  their  orchards  every  year.^^ 

Previous  to  the  organization  of  the  ''Turlock  Merchants  and 
Growers,  Incorporated,"  in  the  spring  of  1915,  buyers  had 
handled  the  cantaloupes  and  other  products  offered  by  the  farm- 
ers of  the  Turlock  district.  These  buyers  demanded  wide  mar- 
gins for  their  services,  and  took  over  the  products  at  their  own 
prices.  Under  these  circumstances,  although  the  farmers  grew 
good  crops,  they  were  unable  to  realize  sufficient  amounts  from 
the  sale  of  their  products  to  pay  their  regular  expenses.  This 
affected  the  business  of  the  merchants  in  Turlock,   since  the 

15  Personal  interview  with  J.  F.  Niswander,  Manager,  California  Peach 
Growers,  July  18,  1916. 

16  Personal  interview  with  J.  B.  Davidson,  of  the  California  Almond 
Growers  Exchange,  Oct.  10,  1916. 

17  Address  of  T.  C.  Tucker,  Manager,  California  Almond  Growers  Ex- 
change, at  Berkeley,  CaL,  Sept.  18,  1916. 


44  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [44 

farmers  were  unable  to  meet  their  obligations.  It  was,  there- 
fore, partly  as  a  matter  of  self-preservation  that  the  Turlock 
merchants  (grocers,  diygoods  merchants  and  other  business 
men)  took  the  initiative  in  forming  an  organization  through 
which  the  farmers  could  market  their  products  without  being 
obliged  to  accept  any  price  the  dealers  happened  to  offer.^^ 

The  fact  that  the  present  organizations  of  growers  represent- 
ing the  citrus  fruit,  deciduous  fresh  fruit,  raisin,  dried  peach, 
and  almond  industries  of  the  state,  were  without  exception  ef- 
fected during  periods  of  depression  in  the  respective  industries, 
forcibly  illustrates  the  general  principle  that  co-operative  mar- 
keting organizations  can  more  readily  be  formed  at  times  when 
the  given  industry  is  in  an  unprosperous  condition,  due  to  the 
failure  of  existing  marketing  methods  to  bring  satisfactory  re- 
turns to  the  growers. 

POSSIBILITY  OF  MARKED  IMPROVEMENTS 

Unless  at  the  time  of  organization,  the  conditions  in  the  in- 
dustry are  so  unsatisfactory  that  striking  improvements  are 
possible  early  in  the  life  of  the  organization,  the  organization 
itself  is  likely  to  die  from  inertia  or  succumb  to  attacks  from 
outside  interests. 

Unless  thought  and  effort  are  given  unstintingly  by  somebody 
to  the  affairs  of  a  co-operative  organization,  the  organization 
will  not  prosper,  or  even  persist;  and  unless  it  can  be  demon- 
strated early  in  the  life  of  the  organization  that  it  is  capable 
of  rendering  its  members  a  distinct  service  that  will  improve 
their  financial  condition,  the  necessary  incentive  to  thought  and 
effort  will  be  lacking.  Men  do  not  persistently  put  forth  effort 
without  hope  of  reward;  and  hope  of  future  reward  is  best 
engendered  by  attainment  of  present  reward.  The  worse  the 
condition  of  an  industry  at  the  time  a  co-operative  organization 
undertakes  the  marketing  of  the  product,  the  more  forcibly 
can  the  organization  demonstrate  its  ability  to  serve  its  members, 
and  the  more  pronounced  will  be  the  support  it  will  elicit ;  and 
unless  striking  results  can  be  attained  there  is  likely  to  be  in- 
sufficient support  to  enable  the  organization  to  persist. 

18  Personal  interview  with  David  F.  Lane,  President,  Turlock  Merchants 
and  Growers,  Incorporated,  July  19,  1916. 


45]      FUNDAMENTAL  PRINCIPLES  OF  CO-OPERATIVE  MARKETING        45 

It  is  also  triie  that  a  co-operative  organization  is  likely  to  meet 
severe  opposition  from,  those  interests  which  have  previously- 
handled  the  product  to  their  own  advantage.  Men  are  loath 
to  relinquish  control  over  a  certain  source  of  revenue  which  they 
have  previously  enjoyed.  This  opposition  is  likely  to  take  such 
extreme  and  insidious  form  as  to  result  in  the  disruption  of  the 
organization  unless  its  right  to  survive  has  been  strikingly  dem- 
onstrated to  its  members  by  reason  of  marked  improvement  in 
their  financial  condition  under  its  operation. 

Especially  pernicious  attacks  were  made  against  the  organiza- 
tion of  citrus  fruit  growers  during  the  early  period  of  its  ex- 
istence. The  representatives  of  the  shippers  used  almost  every 
conceivable  means  in  their  attempt  to  kill  this  movement  of  the 
growers.  They  made  attacks  upon  the  integrity  of  the  local 
managers  and  directors,  trying  to  convince  the  growers  that  the 
men  they  had  placed  in  charge  of  affairs  were  scoundrels  and 
not  handling  the  business  in  the  interests  of  the  growers.  The 
purpose  was  to  make  the  growers  dissatisfied  with  the  manage- 
ment, so  that  they  would  depose  the  leaders  in  charge  and 
substitute  some  mediocre  material  that  would  be  unable  to  handle 
the  business  successfully;  and  thus  lead  to  the  breaking  down 
of  the  Exchange  movement.  Nearly  every  man  of  real  ability 
in  the  Exchange  was  attacked  in  this  way;  and  such  attacks 
were  continued  by  the  shippers  through  all  the  early  years  of 
the  Exchange.^® 

**It  was  quite  to  be  expected  that  every  attempt  of  the  pro- 
ducers to  organize  would  meet  with  bitter  opposition  from  the 
middlemen.  ...  It  is  not  strange  that  these  speculators 
.  .  .  would  spend  large  sums  of  money  to  break  down  or- 
ganization among  growers. 

''It  is  well  known  that  the  Southern  California  Fruit  Ex- 
change has,  ever  since  its  beginning,  been  the  object  of  most 
bitter  and  unscrupulous  opposition  from  fruit  speculators. 
Every  form  of  abuse,  denunciation  and  falsehood  have  been  em- 
ployed to  create  distrust.  Defamation  of  private  character  and 
grossest  libels  against  individuals  who  have  teen  prominent  in 
the  Exchange  have  been  the  common  weapons  of  the 
opposition. ' '  ^^ 

i»  Personal  interview  with  0.  D.  Adams,  Upland,  Cal.,  May  15,  1916. 
20  Eural  Calif omian,  Mar.,  1898,  pp.  61-62. 


46  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [46 

Another  method  reported  to  have  been  employed  by  the  oppo- 
nents of  the  citrus  growers'  organization  was  the  intentional 
glutting  of  certain  markets  in  anticipation  of  the  arrival  of 
fruit  which  had  been  sold  by  the  growers  f.  o.  b.  California, 
to  dealers  in  those  markets ;  ' '  thus  demoralizing  the  market  and 
causing  dissatisfaction  in  the  minds  of  Exchange  customers.  "^^ 

In  reviewing  the  first  year's  operation  of  the  organized  orange 
growers,^^  T.  H.  B.  Chamblin  said:  *'No  movement  among  fniit 
growers  for  the  purpose  of  enabling  them  to  handle  their  own 
business,  was  ever  so  maliciously  misrepresented  and  maligned 
as  the  Southern  California  Fruit  Exchanges,  and  no  organization 
ever  accomplished  so  much  in  so  short  a  time.  It  is  no  exagger- 
ation to  say  that  the  organization  saved  to  the  growers  of  oranges 
no  less  than  $750,000  to  $1,000,000  that  but  for  the  organization 
would  never  have  materialized." 

So  persistent  were  the  enemies  of  the  citrus  fruit  growers* 
organization  in  disseminating  their  misrepresentations  that  defi- 
nite action  to  counteract  their  influence  was  deemed  necessary. 
Nov.  13,  1895,  a  committee  was  appointed  to  formulate  a  *' cir- 
cular to  the  trade  contradicting  the  statements  made  in  anony- 
mous circulars  and  other  circulars  and  publications  in  which 
the  Exchanges  have  been  placed  in  a  wrong  light  before  the 
trade."  "  Feb.  5,  1896,  the  Board  of  Directors  voted  ''that  the 
matter  of  the  misrepresentations  in  the  newspapers  be  referred 
to  the  Chairman,  and  he  be  authorized  to  make  such  corrections 
as  he  deems  proper i"^*  and  June  24,  1896,  it  was  voted  ''that 
a  committee  be  api>ointed  to  formulate  some  plan  of  repudiating 
incorrect  statements  which  may  be  published  and  to  issue  such 
repudiation  in  circular  or  publication  as  they  may  deem  best. '  '^^ 

At  a  called  meeting  of  representatives  from  the  various  ex- 
changes and  local  associations,  August  5,  1896,  the  following 

21  Minutes  of  Meeting  of  Executive  Board  of  Southern  California  Friiit 
Exchanges,  Dec.  19,  1894. 

22  Eural  Calif  oniian,  Dec,  1894,  pp.  635-636. 

23  Minutes  of  Board  of  Directors,  Southern  California  Fruit  Exchange, 
Nov.  13,  1895. 

2*  Minutes  of  Board  of  Directors,  Southern  California  Fruit  Exchange, 
Feb.  5,  1896. 

25  Minutes  of  Board  of  Directors,  Southern  California  Fruit  Exchange, 
June  24,  1896. 


47]      FUNDAMENTAL  PRINCIPLES  OF  CO-OPERATIVE  MARKETING        47 

resolution  was  adopted:  ''Resolved:  That  it  is  the  sense  of 
this  meeting  that  the  interests  of  this  organization  demand  a 
more  direct  medium  of  communication  with  the  growers  whose 
interests  are  involved  to  the  end  that  they  may  be  more  promptly 
and  fully  informed  as  to  the  methods,  objects  and  purposes  of 
the  Exchange,  the  conditions  of  the  markets,  the  disposition  of 
the  fruit,  and  such  other  mattei*s  as  shall  tend  to  bring  them  into 
closer  relation  with  the  system.  To  this  end  we  recommend 
that  the  Board  of  Directors  commence  at  once  the  publication  of 
a  paper  of  such  character  as  shall  in  their  judgment  best  meet 
the  requirements  above  outlined." 

Before  the  end  of  September,  1896,  arrangements  had  been 
completed  for  the  publication  of  this  paper,  to  be  known  as  the 
''Fruit  Exchange  Review,"  under  the  editorship  of  T.  H.  B. 
Chamblin,^®  and  the  first  issue  appeared  in  either  September  or 
October  of  that  year.  Admission  to  the  mails  as  second-class 
matter  was  denied  this  publication  ;27  and  on  June  30,  1897, 
publication  was  "temporarily  suspended"  ^^  and  was  never 
resumed. 

A  few  years  later,  at  a  time  when  one  of  the  leading  daily 
newspapers  of  Southern  California  was  largely  owned  and  con- 
trolled by  one  of  the  fruit  shippers  who  was  a  bitter  enemy  of 
the  Southern  California  Fruit  Exchange,  arrangements  were 
made  by  the  Exchange  with  the  California  Cultivator  for  the 
conducting  of  a  department  in  that  paper  for  the  direct  purpose 
of  counteracting  the  influence  of  matter  derogatory  to  the  Ex- 
change appearing  in  other  papers.^®  This  department  was  called 
"From  a  Business  Standpoint."  It  was  started  May  18,  1900, 
and  was  continued  until  July  1,  1904. 

Thus  for  years,  the  Southern  California  Fruit  Exchange  was 
obliged  to  fight  its  way  against  misrepresentation  to  the  trade 
and  to  citrus  fruit  growers  both  without  and  within  its  own 
ranks. 

28  Minutes  of  Board  of  Directors,  Southern  California  Fruit  Exchange, 
Sept.  9  and  23,  1896. 

27  Minutes  of  Board  of  Directors,  Southern  California  Fruit  Exchange, 
Apr.  28,  1897. 

28  Minutes  of  Board  of  Directors,  Southern  California  Fruit  Exchange, 
June  30,  1897. 

29  Personal  interview  with  C.  B.  Messenger,  editor  California  Cultivator. 


48  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [48 

Somewhat  similar  conditions  of  misrepresentation  and  an- 
tagonism by  shipping  interests  obtained  for  a  time  in  reference 
to  the  California  Fruit  Exchange  (the  growers'  organization 
handling  deciduous  fresh  fruits)  and  the  California  Almond 
Growers  Exchange.  The  steady  progress  of  the  Southern  Cali- 
fornia Fruit  Exchange,  in  spite  of  opposition,  and  at  times  seri- 
ous depletion  of  its  ranks  caused  by  that  opposition,  has  been  a 
source  of  encouragement  to  these  other  organizations  during 
their  early  struggles  for  existence. 

VOLUME  OP  PRODUCT  NEEDED 

At  the  time  a  local  organization  undertakes  to  handle  a  crop, 
there  must  he  a  sufficient  volume  of  one  product  or  closely  aU 
lied  products  represented  by  the  membership  to  enable  shipments 
to  be  made  in  carload  lots  and  to  effect  a  sufficient  aggregate 
saving  in  the  cost  of  marketing  to  more  than  counter-balance  the 
expense  of  operation. 

While  shipments  to  nearby  markets  might  be  made  in  less- 
than-carload  lots,  the  principal  volume  of  California's  horticul- 
tural products  must  be  placed  in  distant  markets;  and  econom- 
ically to  reach  such  markets  carload  shipments  are  essential 
because  of  the  wide  difference  in  freight  rates  on  carload  and 
less-than-carload  lots.  The  loading  of  a  car  of  perishable  fruits 
must  be  completed  at  the  point  where  the  shipment  originates, 
for  the  car  cannot  be  properly  braced  to  insure  the  safe  carriage 
of  its  contents  until  the  loading  is  completed.  <It  is  not  feasible 
to  employ  *' pick-up  cars,"  as  is  often  done  for  short  distance 
shipments,  because  the  haste  attending  the  loading  under  such 
circumstances  would  not  permit  the  proper  ''stripping"  of  the 
cars  for  long  distance  shipment.  •  If  the  car  were  partially  load- 
ed at  each  of  several  different  shipping  points,  it  would  be  diffi- 
cult to  fix  the  responsibility  in  case  of  damage  resulting  from 
improper  loading.  Furthermore,  the  proper  refrigeration  of  a 
perishable  product  would  be  interfered  with  if  the  car  were  re- 
peatedly opened  to  add  to  its  load.  It  is  therefore  quite  essential 
that  a  local  association  be  able  to  ship  its  product  in  carload  lots. 

The  advantages  of  having  only  one  product  or  a  few  closely 
allied  products  are  that  interest  is  concentrated,  and  complica- 
tions arising  from  shipping  unlike  commodities  in  the  same  car 
are  avoided. 


49]      FUNDAMENTAL  PRINCIPLES  OF  CO-OPERATIVE  MARKETING        49 

Since  it  is  necessary  that  a  co-operative  organization  be  able 
to  demonstrate  clearly  its  ability  to  serve  its  members,  and  since 
the  most  tangible  evidence  that  will  directly  appeal  to  the  mem- 
bership of  a  local  shipping  association  is  a  reduction  in  the  cost 
of  marketing,  it  is  important  that  the  volume  of  business  trans- 
acted be  sufficiently  large  to  permit  the  economical  employment 
of  labor  in  handling  the  product  and  loading  the  cai-s,  and  to 
prevent  the  saving  in  other  quarters  from  being  absorbed  by 
overhead  expenses.  There  must  be  sufficient  business  fully  to 
employ  the  time  and  energy  of  the  manager  or  other  salaried 
officer.  Attempts  to  conduct  the  affairs  of  a  co-operative  market- 
ing organization  without  one  responsible  officer  devoting  his  en- 
tire time  to  the  matter,  at  least  during  the  shipping  season,  have 
not  usually  given  satisfactory  results.  To  warrant  the  employ- 
ment of  a  man  for  handling  the  business  there  must  be  sufficient 
business  to  pay  his  salary  out  of  the  saving  in  marketing  ex- 
pense, and  still  leave  some  balance  to  the  credit  of  the  growers. 
And  from  the  standpoint  of  society  in  general,  unless  a  co-opera- 
tive organization  can  handle  a  given  product  at  a  lower  market- 
ing cost  than  it  was  handled  by  previously-operating  factors,  its 
existence  is  not  justified. 

Just  how  large  the  volume  of  the  product  must  be  in  order  to 
insure  its  economical  handling  by  a  co-operative  marketing  organ- 
ization depends  somewhat  upon  the  nature  of  the  given  product. 
Mr.  Geo.  H.  Cutter, ^^  president  of  the  California  Fruit  Ex- 
change, has  stated  that  in  the  handling  of  deciduous  fi-esh  fruits 
there  is  little  chance  of  a  local  organization  of  growers  being 
able  to  finance  its  operations  if  the  output  is  less  than  thirty  car- 
loads during  a  season,  unless  it  is  of  such  a  nature  that  it  all 
is  ready  for  shipment  within  a  short  period  and  there  is  a  good 
local  man  who  can  and  will  devote  his  time  to  the  handling  of 
the  business  for  that  short  period  and  then  be  of  no  further  ex- 
pense to  the  association.  In  the  case  of  citrus  fruits,  a  larger 
volume  of  product  is  necessary,  since  more  elaborate  equipment 
is  needed  for  properly  handling  the  crop.  G.  Harold  Powell, 
general  manager,  California  Fruit  Growers  Exchange,  has  stat- 
ed that,  ' '  It  is  not  usually  practicable  in  the  orange  business,  for 

30  Personal  interview,  July  20,  1916. 


50  MARKETING  CALIFORNIA  HORTICULTURAL.  PRODUCTS  [50 

example,  to  organize  an  association  and  build  a  packing-house 
unless  there  are  at  least  150  cars  of  fruit  to  ship."^^ 

It  would  seem,  then,  that  the  volume  of  the  product  to  be 
handled  in  a  given  locality  is  a  factor  of  considerable  importance 
in  determining  the  likelihood  of  success  or  failure  of  a  growers' 
local  co-operative  marketing  association. 


31  Yearhooh,  U.  S.  Dept.  of  Agr.,  1910,  p.  402. 


CHAPTER  III 
BASIS  OF  MEMBERSHIP 

The  organization  must  he  composed  of  persons  whose  interests 
are  similar.  Memhersip  in  a  growers*  organization  should  usu- 
ally he  limited  to  actual  growers  of  the  crop  to  he  marketed. 

It  has  already  been  suggested  that  a  growers'  co-operative 
marketing  organization  can  more  satisfactorily  handle  one  prod- 
uct or  a  few  closely  allied  products  than  a  diversity  of  prod- 
ucts. This  is  partly  because  of  the  greater  facility  with  which 
shipping  may  be  accomplished  and  trade  connections  established ; 
but  also  because  a  common  interest  in  the  production  and  mar- 
keting of  some  one  specialized  crop  serves  as  a  potent  force  in 
binding  together  the  members  of  the  organization.  Those  whose 
interests  center  in  the  same  crop  as  the  chief  product  of  their 
agricultural  effort  have  much  more  in  common  than  have  a  group 
of  persons  each  of  whom  is  primarily  interested  in  a  different 
crop.  Greater  concentration  of  thought,  greater  unanimity  of 
purpose,  and  more  ready  determination  and  execution  of  policies 
are  possible  in  an  organization  composed  of  growers  of  the 
same  product.  Moreover,  the  mental  attitude  of  persons  en- 
gaged in  the  growing  of  some  special  crop  requiring  particular 
care  or  peculiar  conditions  is  likely  to  be  more  conducive  to 
co-operative  effort  than  that  of  persons  engaged  in  the  production 
of  a  general  assortment  of  ordinary  farm  crops. 

Not  only  should  the  members  of  a  co-operative  marketing  or- 
ganization be  interested  in  the  growing  of  the  same  product; 
but  a  given  local  unit  of  organization  should  be  composed  of  per- 
sons living  within  a  limited  area.  There  are  two  distinct  ad- 
vantages which  may  arise  from  limiting  the  membership  of  a 
local  organization  to  a  comparatively  small  geographical  area. 
(1)  There  is  much  more  likelihood  that  the  members  will  become 
fully  acquainted  with  one  another  —  and  thorough  acquaintance 

51 


52  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [52 

is  essential  to  successful  co-operation.  (2)  The  aims  and  ideals 
of  the  various  members,  the  methods  of  culture  they  employ,  and 
the  quality  and  finish  of  their  product  are  more  likely  to  be 
similar  if  all  live  in  the  same  community  than  if  they  are  dis- 
tributed over  a  wide  territory.  The  concentration  of  orange 
production  in  certain  regions,  thus  making  possible  strong  local 
organizations  in  limited  areas,  has  been  a  factor  of  no  small 
importance  in  contributing  to  the  success  of  the  California  Fruit 
Growers  Exchange;  and  the  difficulties  experienced  in  trying  to 
organize  the  olive  growers  of  the  state  have  been  intensified  by 
reason  of  the  fact  that  the  olive  crop  is  produced  in  widely  scat- 
tered areas. 

(  Various  attempts  to  combine  in  one  organization  the  interests 
OT  growers  and  commercial  packers  or  dealers  have  clearly  dem- 
onstrated the  incompatibility  of  such  an  arrangement.  The  early 
attempts  at  organization  in  the  orange  industry  were  along  this 
line.  The  Orange  Growers'  Protective  Union,  incorporated  at 
Los  Angeles,  1885  ;^  the  Fruit  Growers  Union  of  Southern  Cali- 
fornia, organized  in  Los  Angeles  County  in  January,  1891  -^ 
the  Riverside  Orange  Trust,  incorporated  in  December,  1891  ;^ 
and  the  Riverside  Orange  Growers  and  Packers  Protective  As- 
sociation, operating  during  the  seasons  of  1892  and  1893,*  all 
mark  attempts  to  harmonize  the  interests  of  growers  and  packers 
in  the  marketing  of  oranges.  Each  had  a  short  and  more  or 
less  turbulent  period  of  activity;  and  each  ultimately  failed  be- 
cause it  was  not  founded  upon  correct  principles.  It  was  not 
until  the  growers  decided  to  abandon  attempts  to  reconcile  their 
interests  with  those  of  the  packers  that  real  progress  was  made 
in  organization  for  the  marketing  of  California's  orange  crop. 
Following  the  disruption  of  the  Riverside  Orange  Growers  and 
Packers  Protective  Association  on  February  25,  1893,  and  subse- 
quent demoralization  of  the  markets,^  meetings  of  orange  grow- 
ers were  held  at  Colton,  March  21  and  28,  ''to  secure  some 

1  Biverside  Press  and  Horticulturist,  Nov.  28,  1885,  p.  2. 

2  Biverside  Press  aiid  Horticulturist,  Jan.  24,  Jan.  31,  and  Nov.  28,  1891. 

3  Biverside  Press  and  Horticulturist,  Dee.  5,  Dee.  12,  and  Dec.  26,  1891. 
*  Biverside  Press  and  Horticulturist,  Jan,  30,  and  Dec.  31,  1892;  Jan.  7, 

Feb.  11,  and  Mar.  4,  1893. 

5  Biverside  Press  and  Horticulturist,  Mar.  11  1893. 


53]  BASIS  OF  MEMBERSHIP  53 

groundwork  of  common  action  for  the  future. "  ^  At  the  second 
of  these  meetings,  Mr.  T.  H.  B.  Chamblin,  of  Riverside,  ''was 
the  principal  speaker,  and  he  confined  himself  mainly  to  showing 
that  the  remedy  for  present  evils  was  in  the  hands  of  the  grow- 
ers themselves.  .  .  Remarks  were  made  by  representatives 
from  various  sections,  which  showed  all  were  awake  to  the 
necessity  of  co-operation. ' '  ^  Commenting  upon  the  situation, 
the  editor  of  the  Riverside  Press  and  Horticulturist  remarked: 
''It  is  evident  that  the  sentiment  is  steadily  growing  in  favor 
of  some  effective  co-operation  among  the  fruit  producers,  and 
the  recent  suicidal  policy  of  certain  dealers  is  doing  more  than 
anything  else  to  convince  them  of  its  necessity. ' '  ®  After  the 
Southern  California  Fruit  Exchanges  (organized  as  a  result  of 
the  concerted  movement  among  orange  growers,  following  the 
meetings  at  Colton  and  a  later  meeting  at  Los  Angeles,  April 
4,  1893)  ^  had  been  in  operation  for  one  season,  C.  C.  Thompson, 
a  director  in  the  Semi-Tropic  Exchange,  and  president  of  the 
Pasadena  association,  made  the  statement  that  "A  great  deal 
of  co-operative  work  in  the  past  has  been  attempted  upon  the 
plan  of  un^^ng  the  grower  and  seller  —  a  plan  that  is  obviously 
impractical  as  their  interests  are  inimical. ' '  ^° 

CALIFORNIA   FRUIT   AGENCY 

In  1893  the  citrus  fruit  growei^  seemed  fully  convinced  of  the 
impracticability  of  any  alliance  with  the  commercial  packers 
and  shippers,  and  resolutely  set  about  the  formation  of  their 
own  marketing  organization  independent  of  all  existing  local 
operators.  Ten  years  later,  after  the  co-operative  marketing  or- 
ganization of  the  growers  had  thoroughly  demonstrated  its  abil- 
ity to  handle  successfully  the  output  of  its  members  and  was 
recognized  by  the  trade  as  the  most  important  factor  in  the 
marketing  of  citrus  fruits,  it  came  very  near  being  wrecked  by 
an  unhappy  alliance  with  the  commercial  operators,  under  the 
name  of  the  California  Fruit  Agency. 

6  Biverside  Press  and  Horticulturist,  Mar.  18,  1893. 

7  Biverside  Press  and  Horticulturist,  Apr.  1,  1893. 

8  Biverside  Press  and  Horticulturist,  Apr.  1,  1893. 

9  California  Cultivator,  Apr.,  1893,  p.  100. 

10  iJttroZ  Calif omian,  Oct.,  1894,  p.  533. 


54  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [54 

Since  the  period  of  the  California  Fruit  Agency  (April  1, 
1903,  to  August  31,  1904)  usually  has  been  given  only  passing 
mention  in  accounts  describing  the  marketing  methods  that  have 
been  employed  in  the  handling  of  California  citrus  fruits,  and 
since  the  experience  of  this  organization  serves  as  one  of  the 
most  striking  illustrations  of  the  utter  unfeasibility  of  perma- 
nently harmonizing  the  antagonistic  interests  of  growers  and 
commercial  shippers,  some  consideration  of  the  conditions  which 
led  to  the  formation  of  the  California  Fruit  Agency,  the  diffi- 
culties encountered  in  its  operation,  and  the  causes  which  led  to 
its  dissolution,  seems  warranted  in  this  place. 

The  formation  of  the  California  Fruit  Agency  was  a  sincere 
yet  unsuccessful  attempt  to  combine  the  growers  and  shippers 
into  one  organization  for  the  benefit  of  the  entire  citrus  industry. 
At  a  time  when  all  the  markets  of  the  country  were  completely 
demoralized  by  reason  of  the  presence  of  large  supplies  of 
oranges  showing  excessive  decay  following  a  period  of  wet 
weather,  and  the  various  independent  shippers  were  each  acting 
alone  in  their  efforts  to  find  markets  where  oranges  could  be 
sold,^^  Mr.  G.  W.  Felts,  a  member  of  one  of  the  j^mercial 
shipping  firms,  conceived  the  idea  of  uniting  the  wnole  citrus 
industry  into  one  marketing  agency  that  could  control  distribu- 
tion, eliminate  competition  and  restore  the  markets  to  something 
like  normal  condition.  He  thought  that  the  logical  way  to 
handle  the  citrus  fruit  crop  was  to  have  all  interests  united, 
and  that  the  psychological  moment  had  arrived  for  bringing 
about  such  a  union.  At  that  time  there  were  a  number  of  firms 
of  packers  or  shippers,  who  bought  fruit  from  growers  or  packed 
and  sold  fruit  for  the  growers  at  a  specified  price  per  box.^^  A 
certain  group,  including  all  the  prominent  firms,  was  supposed 
to  control  at  that  time  about  42  per  cent  of  the  crop  in  the 
aggregate,  and  the  Southern  California  Fruit  Exchange  was 
credited  with  controlling  47  per  cent.^^  Mr.  Felts'  idea  was 
to  bring  together  these  interests  representing  practically  90 
per  cent  of  the  crop,  and  thus  eliminate  "cut-throat"  methods, 

11  Naftzger,  A.  H.,  * '  Conditiona  Leading  to  the  Organization  of  the  Cal- 
ifornia Fruit  Agency."     Riverside  Daily  Press,  June  5,  1903,  p.  5. 

12  Personal  interview  with  G.  W.  Felts,  Apr.  25,  1916. 

13  Los  Angeles  Times,  Mar.  31,  1903,  p.  7. 


55]  BASIS  OF  MEMBERSHIP  55 

the  playing  of  one  firm  against  another  by  brokers  to  force  down 
prices,  and  excessive  marketing  expense  due  to  useless  wiring 
and  the  duplicating  of  agents. 

The  marketing  methods  of  the  Exchange  and  the  ''Independ- 
ents," or  packers,  were  entirely  different,  in  that  the  Exchange 
sold  almost  entirely  on  a  delivered  basis,  while  the  packers 
pushed  f.  0.  b.  sales  as  much  as  possible.  Although  there  was 
keen  competition  amongst  the  various  packers,  they  hated  the 
Exchange  worse  than  any  of  their  own  number,  and  were  col- 
lectively fighting  the  Exchange  at  every  opportunity.  The  Ex- 
change, on  the  other  hand,  was  opposed  to  the  independents  as  a 
class,  because  they  were  continually  disturbing  market  condi- 
tions by  consigning  cars  to  markets  already  supplied.^* 

In  spite  of  the  advice  of  his  partner  that  it  would  be  impossible 
to  unite  these  two  antagonistic  interests,  Mr.  Felts  secured  an 
audience  with  the  president  and  general  manager  of  the  Ex- 
change, and  laid  the  matter  before  him.  After  a  long  confer- 
ence, the  latter  agreed  that  such  an  arrangement  as  that  sug- 
gested by  Mr.  Felts  would  be  ideal,  but  held  that  it  could  not 
be  brought  about  because  of  the  antagonistic  nature  of  the  two 
elements  and  the  lack  of  union  among  the  independents.  How- 
ever, he  stated  that  if  all  the  independents  would  join  such  a 
movement,  the  Exchange  would  do  likewise. 

Mr.  Felts  then  talked  with  the  independent  packers  one  after 
another,  and  secured  favorable  consideration  of  his  project  by 
all  with  whom  he  consulted.  Then  these  packers  united  to  form 
the  California  Citrus  Union,  in  order  that  the  proposed  general 
marketing  agency  might  be  composed  of  the  two  large  organiza- 
tions the  Southern  California  Fruit  Exchange  and  the  Califor- 
nia Citrus  Union.  Committees  representing  each  of  these  or- 
ganizations were  in  almost  continuous  session  day  after  day. 
The  ''negotiations*'  that  resulted  in  the  formation  of  the  Agency 
"involved  a  great  deal  of  thought,  consideration,  deliberation, 
concession,  and  sinking  of  differences  and  trying  to  get  together 
for  the  protection  of  the  industry  itself.''  ^® 

That  great  things  were  expected  of  the  new  organization  was 

1*  Personal  interview  with  G.  W.  Felts. 

isNaftzger,  A.  H.,  '^ Marketing  Citrus  Fruits.''  Proceedvags  $8th  Fruit 
Growers  Convention,  May  5-8,  1903,  pp.  74-78. 


56  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [56 

evident  from  the  announcements  made  to  the  public  and  to  all 
Exchange  members  just  before  the  business  was  taken  over  by 
the  Agency.  Under  the  heading,  '^  Hammer  out  of  Business 
.  .  .  Exchange  and  Independent  Shippers  Together  for  the 
Marketing, ' '  an  article  in  the  Los  Angeles  Times  states :  ^«  ' '  Of- 
ficial announcement  is  made  of  the  new  fruit-handling  merger, 
which  promises  to  work  a  revolution  ...  in  marketing  the 
citrus  fruit  crops  of  Southern  California.  A  deal  has  been  con- 
summated that  combines  the  Southern  California  Fruit  Ex- 
change and  the  independent  shippers.     .     . 

''These  two  interests,  heretofore  antagonistic,  are  to  merge 
into  a  corporation,  to  be  known  as  the  California  Fruit  Agency, 
through  which  practically  all  the  oranges  grown  in  California 
will  be  placed  upon  the  market  to  the  best  advantage  of  all 
the  growers.     .     . 

' '  The  primary  object  of  the  new  venture  is  to  eliminate  ruin- 
ous competition,  prevent  glutted  markets  and  provide  equal 
distribution  of  the  output  throughout  the  United  States.  The 
amalgamation  of  all  shippers,  it  is  claimed,  will  work  to  the  es- 
tablishment of  a  uniform  price,  protect  the  eastern  buyer  and 
do  away  with  heavy  losses  from  rejections  and  hurtful  specula- 
tion. Furthermore,  it  is  urged,  eastern  consumers  will  get  their 
oranges  at  the  same  price  per  dozen  as  they  are  paying  now, 
but  the  methods  used  by  the  middlemen  to  hammer  downi  this 
[his]  buying  price  will  be  impossible,  and  the  grower  will  reap 
the  benefit. '  * 

The  announcement  sent  out  by  the  central  office  of  the  Ex- 
change to  its  members,  was  as  follows  :^^ 

' '  To  all  Exchange  Members  —  Gentlemen :  This  will  announce 
to  you  the  organization  of  the  California  Fruit  Agency,  organ- 
ized for  the  purpose  of  marketing  the  citrus  fruits  of  California 
for  the  exchange,  shippers,  and  growers,  alike  on  a  co-operative 
basis.  This  organization  will  become  the  selling  agency  for  all 
parties  to  the  arrangement  with  similar  aims  and  policies  as  the 
Southern  California  Fruit  Exchange. 

''After  long  and  painstaking  negotiations,  we  have  reached  a 
plan  which  we  confidently  expect  will  very  greatly  facilitate  the 

16  Los  Angeles  Times,  Mar.  31,  1903,  p.  7. 

17  As  quoted  in  Los  Angeles  Times,  Mar.  31,  1903. 


57]  BASIS  OF  MEMBERSHIP  57 

marketing  of  our  fruit.  Under  the  arrangement  which  we  have 
made,  all  of  the  principal  shippers  who  have  been  for  years  en- 
gaged in  the  business,  join  in  the  marketing  agency.  They 
continue  in  the  business  practically  as  packers,  putting  at  the 
service  of  the  growers  not  members  of  the  exchange  their  nu- 
merous packing-houses  and  extensive  facilities,  and  at  a  less 
cost  to  the  grower  than  heretofore.     .  ^ 

"If  it  should  be  alleged  that  this  is  a  trust,  our  answer  is 
that  we  neither  seek  to  limit  production  nor  to  fix  arbitrary 
prices,  and  therefore  it  is  not  any  more  in  the  nature  of  a  trust 
than  is  the  exchange.     .     . 

"Southern  California  Fruit  Exchange.'' 

A  few  days  later,  the  president  of  the  Exchange  was  quoted 
as  saying:^*  "Every  interest  of  every  Exchange  member  has 
been  guarded  with  the  utmost  care,  and  at  the  same  time  facili- 
ties for  marketing  will  be  offered  to  the  growers  outside  of  the 
Exchange  better  than  they  have  ever  had  before.  .  .  The 
consolidation  has  been  arranged  upon  such  equitable  terms  that 
animosities  between  the  people  in  and  out  of  the  Exchange 
should  cease,  because  both  are  put  in  better  shape  than  before 
to  get  the  value  of  their  products." 

For  a  short  time  it  looked  as  though  the  California  Fruit 
Agency  were  the  solution  of  all  the  marketing  problems  per- 
taining to  citrus  fruits.  When  it  started  business  April  1,  1903, 
the  Agency  took  over  some  1800  cars  of  fruit  en  route  and  on 
tract  unsold, ^^  at  a  time  when  all  markets  were  congested,  de- 
moralized and  in  a  deplorable  condition,  and  the  situation  al- 
together disheartening.  However,  within  a  short  time,  the 
congested  condition  of  the  markets  was  relieved,  and  the  situation 
entirely  changed.  Wider  distribution  of  the  crop  was  secured 
than  previously,  for  agents  were  shifted  to  new  points,  without 
additional  expense  to  the  industry,  for  previously  both  the  Ex- 
change and  some  independent  had  maintained  representatives  in 
the  same  market.  Thus  the  former  agents  of  both,  maintained 
now  by  the  Agency,  were  able  to  cover  a  larger  number  of  mar- 
kets.   J.  C.  Curtiss,  a  representative  of  the  Citrus  Union,  was 

i»  Riverside  Daily  Press,  Apr.  9,  1903,  p.  2. 

19  Personal  interview  with  G.  W.  Felts,  Apr.  25,  1916. 


58  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [58 

quoted  as  saying  :^^  '*  .  .  .  only  the  prompt  organization 
of  the  packers  saved  the  great  orange  industry  from  going  to 
the  wall  this  spring.  .  .  The  worst  slump  the  orange  market 
ever  had  was  just  ahead  of  us  and  this  organization  was  the 
only  thing  that  could  save  it.  And  it  did  save  it."  A  few 
weeks  later,  the  general  manager  of  the  Agency  and  president 
of  the  Exchange  stated  that,^^  ''Shipments  during  the  month  of 
May  were  50  per  cent  greater  than  during  the  same  period  in 
any  previous  season,  and  the  fruit  ran  to  large  sizes  and  did 
not  have  good  carrying  qualities.  .  .  Nothing  but  the  exist- 
ence of  the  Agency  has  prevented  a  total  collapse  all  along  the 
line.'' 

But,  in  spite  of  this  apparent  accomplishment  of  its  object 
by  the  Agency,  matters  within  the  organization  were  by  no 
means  harmonious.  Since  the  occasion  of  forming  the  Agency 
was  a  special  emergency  in  market  conditions,  and  since  that 
emergency  could  be  met  only  by  prompt  action,  the  board  of 
directors  of  the  Southern  California  Fruit  Exchange  (com- 
posed of  one  representative  from  each  district  exchange)  acted 
on  behalf  of  that  organization  without  first  referring  the  matter 
to  the  various  district  exchanges  and  local  associations  for  con- 
sideration. Such  a  procedure  would  have  delayed  action  until 
after  the  marketing  season  for  that  year  was  over.  Even  as  it 
was,  the  Agency  took  charge  of  the  marketing  of  the  fruit  sev- 
eral weeks  before  all  the  provisions  of  the  agreement  between 
the  Exchange  and  the  Agency  were  definitely  determined.^^ 
It  was  not  until  May  15  that  copies  of  the  agreement  were  sent 
to  the  several  district  exchanges  for  ratification.  That  an  en- 
thusiastic response  was  not  received  from  all  the  exchanges  is 
indicated  by  the  fact  that  on  September  4  a  second  request  was 
ordered  sent  to  the  exchanges  that  had  not  ratified  the  agree- 
ment.^^ In  the  meantime,  conditions  within  the  Southern  Cali- 
fornia Frxuit  Exchange  became  so  strained^*  that  one  of  the 

20  Riverside  Daily  Press,  Apr.  15,  1903,  p.  3. 
i-^  Riverside  Batty  Press,  June  5,  1903,  p.  5. 

22  Minutes  of  Board  of  Directors,  Southern  California  Fruit  Exchange, 
Apr.  1,  17;  May  1,  15,1903. 

23  Minutes  of  Board  of  Directors,  Southern  California  Fruit  Exchange, 
Sept.  4,  1903. 

24  Minutes  of  Board  of  Directors,  Southern  California  Fruit  Exchange, 
May  1,  9,  14,  15,  22,  June  26,  Aug.  7,  21,  28,  1903. 


59]  BASIS  OF  MEMBERSHIP  59 

district  exchanges  voted  to  withdraw  from  the  organization,  and 
was  prevailed  upon  to  rescind  its  action  onlj^  after  strenuous  con- 
ciliatory efforts  on  the  part  of  Mr.  Pelts  ^^  and  others.^^ 

The  feeling  among  some  of  the  component  parts  of  the  South- 
em  California  Fruit  Exchange,  pending  the  ratification  of  the 
agreement  with  the  Agency,  was  expressed  in  a  resolution 
adopted  by  the  San  Bernardino  County  Fruit  Exchange,  July 
14,  1903,  and  presented  to  the  "Southern  California  Fruit  Ex- 
change: "Be  it  resolved,  that  we  hereby  respectfully  request 
that  the  So.  Calif.  Fruit  Exchange  quickly  return  to  those  sure 
principles  upon  which  the  organization  which  has  done  so  much 
for  the  citrus  industry  of  California  was  based ;  that  no  alliance 
be  made  or  recognized  which  involves  repudiation  of  contracts, 
or  discrimination  against  loyal  members  of  the  Exchange  or 
the  adoption  of  methods  proven  to  be  false. 

**That  only  such  alliance  be  made  as  the  management  and 
rank  and  file  of  the  Exchanges  shall  judge  to  be  for  the  best 
interests  of  the  industry  and  just  to  all. 

"All  this  to  the  end  that  the  integrity  and  harmony  of  the 
Exchanges  may  be  maintained  and  their  beneficent  influence  be 
perpetuated. ' '  ^^ 

One  provision  in  the  agreement  which  was  particularly  dis- 
tasteful to  the  local  associations  of  the  Exchange,  and  which 
was  the  primary  cause  of  the  dissension  mentioned  above,  was 
that  prohibiting  any  increase  in  the  membership  of  the  Exchange 
except  under  certain  regulations  or  with  the  consent  of  the 
Agency.^®  This  provision  had  been  agreed  to  by  the  directors 
of  the  Exchange  in  response  to  the  demands  of  representatives 
of  the  Citrus  Union  that  definite  assurance  be  given  them  that 
sufficient  fruit  would  always  be  left  outside  of  the  Exchange, 
and  thus  available  to  the  commercial  packers,  to  insure  abundant 

25  Mr.  Felts  waa  Secretary  of  the  California  Fruit  Agency  throughout  its 
existence. 

26  Eiverside  Daily  Press,  Sept.  5,  1903,  p.  4.  Also  Minutes  of  Board  of 
Directors,  Southern  California  Fruit  Exchange,  Sept.  11,  1903. 

27  Transcribed  from  the  original  document,  in  office  of  California  Fruit 
Growers  Exchange,  Los  Angeles. 

28  Original  document,  bearing  seals  and  signatures,  in  office  of  California 
Fruit  Growers  Exchange,  Los  Angeles. 


60  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [60 

material  for  the  operation  of  their  packing-houses.^®  New 
shippers  were  to  be  required  to  go  wherever  the  committee  of 
the  Agency  directed.  The  independent  feeling  of  human  nature 
asserted  itself  against  this  dictation  to  such  an  extent  that  a 
''grievance  committee"  had  to  be  appointed  to  take  charge  of 
the  numerous  complaints.  While  the  committee  usually  de- 
cided that  the  fruit  of  a  given  orchard  was  to  be  handled  through 
the  packing-house  to  which  its  location  made  it  naturally  tribu- 
tary, many  growers  were  dissatisfied,  and  trying  times  were 
experienced.  Jealousies  and  discord  between  Exchange  men 
and  Citrus  Union  men  were  continually  coining  to  the  surface 
and  the  old  animosities  cropping  out.^°    ' 

According  to  Mr.  Felts'  original  plan,  the  commercial  packers 
who  united  to  form  the  Citrus  Union,  were  to  act  merely  as 
packing  agents  for  the  organization  at  a  specific  price  per  box 

—  that  price  being  sufficient  to  yield  them  a  fair  profit.  He 
proposed  that  in  any  given  locality  where  both  an  Exchange 
packing-house  and  an  independent  packing-house  were  operating 

—  the  Exchange  charging  only  the  actual  cost  for  packing  and 
the  independent  packer  making  a  profit  —  a  uniform  charge  for 
packing  in  both  houses  be  established,  said  charge  being  the 
average  of  the  two  rates  formerly  obtaining  at  the  two  houses. 
Such  an  arrangement  would  have  given  neither  house  an  ad- 
vantage with  the  grower.  It  was  hoped  that  this  would  eventu- 
ally result  in  a  uniform  charge  for  packing  throughout  the  entire 
citrus  district,  and  have  a  large  tendency  to  eliminate  local 
jealousies  and  prejudices.  However,  the  two  factions  could  not 
get  together  on  this  point,  and  it  was  never  adopted.''^  This 
is  merely  a  further  illustration  of  the  fact  that  a  co-operative 
organization  of  growers,  one  of  the  fundamental  principles  of 
which  is  to  charge  only  actual  cost  for  all  services,  and  a  com- 
mercial organization  whose  operations  are  carried  on  for  profit, 
cannot  agree  upon  the  same  charge  for  the  same  service.  Their 
objects  are  too  diverse  to  permit  such  an  agreement. 

Another  feature  regarding  which  the  two  factors  making  up 
the  California  Fruit  Agency  were  unable  to  agree  was  the  or- 

29  Personal  interview  with  W.  N.  Chamblin,  Eiverside,  May  27,  1916. 

30  Personal  interview  with  G.  W.  Felts,  Apr.  25,  1916. 

31  Personal  interview  with  G.  W.  Felts,  Apr.  25,  1916. 


61]  BASIS  OF  MEMBERSHIP  61 

ganization  of  the  sales  department.  It  had  been  understood 
that  R.  H.  Wilkinson  (secretary  of  the  Exchange)  was  to  be 
sales  manager  of  the  Agency, ^^  with  T.  M.  Simpson  and  F.  J. 
Harrigan  (who  had  been  salesmen  for  independent  packers) 
working  under  him.  However,  it  was  agreed  that  Simpson  and 
Harrigan  should  be  allowed  to  dispose  of  the  inferior  fruit  of 
the  Citrus  Union  then  en  route  and  in  the  markets,  before  this 
arrangement  was  put  into  effect.  Somewhat  later  when  a  mem- 
ber of  the  ''marketing  committee"  of  the  board  of  directors 
suggested  that  the  sales  department  be  organized  as  originally 
contemplated,  it  developed  that  the  Citrus  Union  would  not 
concede  this  point,  ^^  and  each  of  the  three  members  of  the 
"Sales  Department"  continued  to  work  independently,  the  ter- 
ritory being  divided  among  them.  At  a  subsequent  time,  Mr. 
Felts,  secretary  of  the  Agency,  attempted  to  bring  about  the 
organization  of  this  department  on  a  stable  basis,  but  the  lack  of 
harmony  between  the  representatives  of  the  Exchange  and  the 
Union,  on  the  board  of  the  Agency,  forestalled  this  action."** 
Each  factor  evidently  desired  to  exercise  more  control  over  the 
marketing  policies  than  would  be  possible  if  a  man  in  sympathy 
with  the  marketing  methods  of  the  other  factor  were  placed 
in  charge  of  the  department.  Thus,  the  sales  department  was 
never  thoroughly  organized,  and  an  element  of  weakness  was 
left  which  contributed  to  the  final  dissolution  of  the  Agency,  v 
In  the  se£ison  of  1903-4,  the  brokers  and  commission  men  who 
had  been  left  out  of  the  new  plan  of  distributing  the  citrus 
crop,  ''put  every  object  possible  in  the  way  of  the  Agency's 
marketing. "  ^^  It  was  said  that  the  merger  threw  200  to  400 
brokers  out  of  employment.  "These  are  [were]  all  work- 
ing against  the  interest  of  California  fruit  instead  of  for  it."  ^® 
The  independent  shippers  in  California  (those  outside  of  the 
Agency)  also  fought  the  Agency.  Price-cutting  and  the  sacrifice 
of  fruit  to  punish  their  opponents  or  gain  control  of  certain 

32  Minutes  of  Board  of  Directors,  Southern  California  Fruit  Exchange, 
Apr.  1,  1903. 

33  Personal  interview  with  P.  J.  Dreher,  June  30,  1916. 

34  Personal  interview  with  G.  W.  Felts,  Apr.  25,  1916. 
^^  Riverside  Daily  Press,  Mar.  26,  1904,  p.  5. 

36  Riverside  Daily  Press,  Apr.  4,  1904,  p.  6 


62  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [62 

markets  were  resorted  to  on  both  sides.  This  policy,  together 
with  a  long  period  of  cold  weather  and  the  largest  crop  that  had 
yet  been  harvested,  demoralized  the  markets.  By  March  10,  the 
situation  was  attracting  serious  attention  on  the  part  of  tiie 
growers.  An  item  in  the  Riverside  Daily  Press  on  that  date 
said:  ''The  returns  are  low  of  late,  in  some  cases  averaging 
10  to  20  cents  a  box.  In  other  cases  there  is  absolute  loss.  .  . 
The  Fruit  Agency  people  figure  that  the  average  returns  have 
been  about  40  cents  a  box.''  The  Agency  was  reported  to  have 
said  that  the  poor  market  was  ''due  to  the  prolonged  cold 
weather  in  the  East."  Growers  were  quoted  as  saying  that  it 
was  ' '  largely  due  to  the  fact  that  the  dealers  have  been  admitted 
into  the  growers'  combination;  and  that,  further,  because  of  the 
trust's  method  of  doing  business  the  hostility  of  hundreds  of 
brokers  and  dealers  in  the  East  has  become  arrayed  against 
California  oranges. ' '  The  item  further  stated :  ' '  There  is  wide- 
spread discontent  among  the  growers  .  .  .  and  an  attempt  is 
being  made  to  call  a  mass  meeting  .  .  .  for  .  .  .  con- 
sidering the  situation. ' '  ^^  One  of  the  local  associations  in  the  Ex- 
change had  "adopted  resolutions  asking  that  the  arrangement 
existing  between  the  growers  in  the  fruit  exchanges  and  the  deal- 
ers in  the  Citrus  Union  be  dissolved. ' '  ^^  On  March  17,  the  state- 
ment was  made  that  "The  present  season  [1904]  has  so  far  cer- 
tainly been  the  most  unsatisfactory  to  the  grower  that  he  has 
ever  experienced. ' '  ^®  Mention  was  made  of  a  grower  whose 
fruit  was  handled  by  an  independent  shipper,  who  received  17 
cents  in  postage  stamps  for  100  boxes  of  oranges.*®  March  25, 
E.  P.  Ripley,  president  of  the  Santa  Fe  Railway,  was  quoted 
as  saying  "that  the  competition  among  different  orange  factors 
is  the  chief  cause  of  the  weakening  of  the  industry. "  *^  It  was 
also  stated  that  "widespread  dissatisfaction  exists  among  the 
growers."  The  growers  felt  that  there  had  been  something 
wrong  with  the  marketing  methods  or  management;  that  the 

sf  Riverside  Daily  Press,  Mar.  10,  1904,  p.  7. 
3^  Biverside  Daily  Press,  Mar.  10,  1904,  p.  7. 
39  Eiverside  Daily  Press,  Mar.  17,  1904,  p.  2. 
^oBiverside  Daily  Press,  Mar.  31,  1904,  p.  7. 
41  Biverside  Daily  Press,  Mar.  25,  1904,  p.  6. 


63]  BASIS  OF  MEMBERSHIP  63 

cold  weather  and  the  ''largest  Florida  crop  since  the  great 
freeze"  could  not  account  for  the  poor  market.*^ 

Various  rumors  and  reports  were  published  by  those  opposed 
to  the  Agency,  with  a  view  to  bringing  about  dissension  and 
strife  among  the  various  interests  in  California.  Finally  a  series 
of  charges  attacking  the  integrity  of  the  general  manager  of  the 
Agency  was  published  in  a  local  paper  owned  and  controlled 
by  a  member  of  one  of  the  local  associations  belonging  to  the 
Exchange.*^  Although  he  was  cleared  of  all  these  charges  by  a 
*' Commission  of  Inquiry,"  whose  investigations  and  delibera- 
tions extended  from  April  25  to  August  27,  1904,**  he  did  not 
continue  his  connection  with  citrus  marketing  organizations  after 
September  1,  1904. 

In  the  meantime,  following  agitation  among  the  constituents 
of  the  organization,*^  the  board  of  directors  of  the  California 
Fruit  Agency  had  voted  to  "discontinue  business."  The  of- 
ficial statement  announcing  this  decision  was,  in  part,  as  follows : 

"At  a  meeting  of  the  board  of  directors  of  the  California 
Fruit  Agency,  held  May  20,  1904,  the  following  was  unanimously 
adopted : 

"As  this  organization  has  not  received  the  general  approval 
and  earnest  support  of  the  growers  necessary  to  complete  and 
permanent  success,  we  deem  it  advisable  to  discontinue  business 
on  September  1  next,  closing  the  accounts  as  soon  thereafter 
as  possible.     .     . 

"The  California  Fruit  Agency  will,  in  deference  to  the  ex- 
press view  of  its  growers,  discontinue  business  on  September  1, 
next,  and  thereafter  the  Southern  California  Fruit  Exchange 
will  resume  business,  and  the  California  Citrus  Union  as  a 
corporation  will  become  an  active  marketing  factor."*^ 

At  the  same  time  the  board  of  directors  of  the  Southern  Cali- 
fornia Fruit  Exchange  issued  a  statement  addressed  to  Ex- 

*2  Riverside  Daily  Press,  Mar.  25,  1904,  p.  2. 

43  Minutes  of  Board  of  Directors,  Southern  California  Fruit  Exchange, 
Apr.  1,  1904. 

44  The  full  report  of  this  ' '  Commission  of  Inquiry ' '  is  contained  in  two 
volumes  aggregating  over  eleven  hundred  pages  of  typewritten  matter,  in 
the  oface  of  the  California  Fruit  Growers  Exchange,  at  Los  Angeles. 

46  Eiverside  Daily  Press,  Apr.  14,  1904,  p.  3. 
*<^Biverside  Daily  Press,  May  21,  1904,  p.  4. 


64  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [64 

change  members.  Referring  to  the  formation  of  the  Agency,  it 
said:  ''This  undertaking  was  entered  into  in  good  faith  and 
every  effort  in  our  power  has  been  put  forth  to  make  it  a 
success."  It  then  continues:  *'  ...  The  growers  outside 
the  Exchange  did  not  come  into  the  organization  in  such  num- 
bers, and  give  support  to  it,  as  was  necessary  to  complete 
success.  There  were  also  other  insurmountable  difficulties  to 
contend  with,  which  should  not  be  overlooked  by  growers.  In 
voting  to  discontinue  the  business  of  the  California  Fruit  Agency 
on  September  1st  next,  it  is  with  the  expectation  that  the 
Southern  California  Fruit  Exchange  will  resume  active  business 
at  that  time  with  such  changes  in  policy  and  plans  as  changed 
conditions  may  require,  and  such  as  the  growers  through  their 
local  Exchanges  may  dictate. 

''The  contract  of  the  Exchange  remains  in  full  force  until 
August  31,  1905.  Many  growers  have  complained  that  under 
the  Agency  agreement  new  members  could  not  be  admitted  to 
the  Exchanges.  Their  desire  to  co-operate  will  now  be  tested,  as 
the  Exchanges  will  be  free  to  take  members,  and  will  be  pre- 
pared to  market  fruits  after  September  1st. 

"Opposition  from  parties  with  adverse  interests  and  criticism 
from  parties  who  know  nothing  about  the  business  will  probably 
be  continued,  but  Exchange  members  should  pay  no  attention 
to  these  things,  but  give  full  support  to  a  marketing  system 
under  their  own  control,  and  which  has  heretofore  proved  its 
efficiency.  * '  *^ 

I  As  contemplated  in  these  announcements,  the  California  Fruit 
Agency  ceased  activity  September  1,  1904,  and  the  Southern 
California  Fruit  Exchange  resumed  the  marketing  of  fruit  for 
its  members,  and  has  continued  in  active  operation  ever  since 
(though  its  name  has  been  changed  to  the  California  Fruit 
Growers  Exchange). 

The  primary  cause  of  the  failure  of  the  California  Fruit 
Agency  to  meet  the  requirements  of  a  marketing  agency  for  Cal- 
ifornia fruits  was  the  impracticability  of  harmonizing  the  inter- 
ests of  the  component  parts  of  the  organization,  consisting  as 
they  did  of  co-operative  organizations  of  growers  on  the  one  hand 

47  Minutes  of  Board  of  Directors,  Southern  California  Fruit  Exchange, 
May  20,  1904. 


65]  BASIS  OF  MEMBERSHIP  65 

and  commercial  firms  of  packers  and  shippers  on  the  other.  Al- 
though the  Agency  was  apparently  successful  in  fulfilling  its 
purpose  in  the  spring  of  1903,  and  relieved  the  congestion  in  the 
markets  almost  immediately  following  its  formation,  it  did  not 
succeed  in  preventing  an  even  worse  congestion  a  year  later. 
This  failure  was  probably  due  in  part  at  least  to  the  introduction 
of  marketing  policies  which  never  received  the  sanction  of  the 
growers,  and  to  the  general  lack  of  harmony  in  the  sales  depart- 
ment. As  the  only  means  which  would  subserve  the  interests  of 
both  growers  and  packers  in  one  organization,  a  large  amount  of 
arbitrary  control  and  authority  was  necessarily  vested  in  the 
central  body.  Such  an  arrangement  was  diametrically  opposed 
to  the  principles  of  true  co-operation ;  and  its  disapproval  by  the 
local  co-operative  associations  of  growers  was  the  logical  outcome. 
The  movement  for  coalition  did  not  originate  among  the  growers. 
It  was  an  attempt  at  organization  from  the  top  downward,  in- 
stead of  from  the  bottom  upward.  The  agreement  which  formed 
the  working  basis  of  the  California  Fruit  Agency  was  a  compro- 
mise worked  out  by  the  officers  of  the  Southern  California  Fruit 
Exchange  and  representatives  of  the  shipping  firms,  in  attempt- 
ing to  reconcile  the  adverse  interests  of  growers  and  commercial 
shippers;  and  it  contained  provisions  to  which  the  growers  in 
the  Exchange  associations  would  never  have  submitted  if  their 
wishes  had  been  consulted  before  the  action  was  taken.  The  Cal- 
ifornia Fruit  Agency  failed  to  persist  because  it  was  an  attempt 
''to  put  into  double  harness  two  forces  whose  interests  aie  not 
common,  and  who  cannot  work  together  successfully. "  **  ^ 


^ 


OTHER  ATTEMPTS  TO  COMBINE  GROWERS  AND  DEALERS 


Attempts  to  combine  the  interests  of  growers  and  dealers  have 
also  been  made  in  the  deciduous  fruit  industry.  The  California 
Fruit  Union,  incorporated  November  13,  1885,  started  as  a 
strictly  co-operative  organization  with  membership  limited  to 
growers.*®  However,  after  one  season's  operation,  during  which 
severe  competition  with  commercial  shippers  was  experienced, 
and  neither  growers  nor  shippers  made  much  monev^he,  by-laws 

*BBiverside  Daily  Press,  May  18,  1904,  p.  2. 

49  Bien.  Bep.  Cdl.  St.  Bd.  of  Hort.,  1885-6,  pp.  78-97.  Also  Pacific  Bvral 
Press,  Nov.  14,  1885,  p.  397. 


66  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [66 

were  changed  so  that  commercial  shippers  were  admitted  to  the 
organization.^^  Under  the  new  arrangement  the  Union  handled 
a  much  larger  amount  of  fruit  ^^  and  was  reported  to  be  still ' '  in 
successful  operation"  in  1892;^^  but  it  had  retired  from  busin  ^8 
before  the  opening  of  the  shipping  season  of  1894.^^  Its  policies 
were  largely  dominated  by  the  shippers  and  this  caused  the 
growers  to  withdraw  their  support.^* 

In  November,  1894,  a  convention  of  fruit  growers  at  Sacra- 
mento "resulted  in  the  establishment  of  an  organization  known 
as  the  Fruit  Growers  and  Shippers'  Association,''  whose  objects 
were  *'  (1)  the  establishment  of  a  Bureau  of  Information  to  reg- 
ulate distribution;  (2)  to  establish  one  auction-room  in  each  city; 
(3)  to  make  such  auction-rooms  open  and  free  to  all  buyers;  (4) 
to  do  all  such  other  things  as  may  be  conducive  to  the  best  inter- 
ests of  the  fresh-fruit  industry  of  Calif omia. "  ^^  In  spite  of 
the  existence  of  this  organization,  the  prices  received  for  fresh 
deciduous  fruits  in  1895  were  a  great  disappointment  to  the 
growers;  and  one  of  the  chief  causes  of  low  prices  was  said  to 
have  been  the  **  constant  glutting  of  the  Eastern  markets  by  the 
indiscriminate  shipments  of  fruit  consigned  to  parties  unquali- 
fied to  handle  the  product  intelligently. ''''^  That  difficulty  was 
experienced  in  reconciling  the  interests  of  growers  and  shipi)ers 
is  evident  from  the  fact  that  in  April,  1896,  a  committee  "con- 
sisting of  seven  growers  and  shippers,  representing  the  various 
elements  engaged  in  the  fresh-fruit  trade, ^^  was  appointed  to 
bring  about  harmony  among  the  conflicting  interests.  Although 
it  was  reported  that  the  Association  was  "entirely  successful  in 
bringing  about  a  harmony  of  spirit  and  a  unity  of  action  among 
shippers  and  growers, ' '  ^®  the  growers  did  not  prosper  under  the 
arrangement,  and  conditions  in  the  deciduous  fruit  industry  be- 
so  Bien.  Eep.  Col.  St.  Bd.  of  Hart.,  1885-6,  pp.  306-323,  and  A71.  Bep.  Col. 
/^.  Bd.  of  Hort.,  1890,  pp.  83-89. 
'   61  An.  Eep.  St.  Bd.  of  Hort.,  1889,  p.  446;  and  1890,  p.  88. 

52  An.  Bep.  St.  Bd.  of  Hort.,  1892,  p.  329. 

^^Bural  Calif ornian,  Apr.,  1894,  p.  192. 

6*  A  Brief  History  of  tlie  Deciduous  Fruit  Industry  of  California,  p.  8. 

^Bien.  Bep.  Cal.  St.  Bd.  of  Hort.,  1895-96,  p.  67. 

6^  Bien.  Bep.  Cal.  St.  Bd.  of  Hort.,  1895-96,  p.  67. 

^rBien.  Bep.  Cal.  St.  Bd.  of  Hort.,  1895-96,  p.  69. 

68  Bien.  Bep.  Cal.  St.  Bd.  of  Hort.,  1895-96,  p.  71. 


67]  BASIS  OF  MEMBERSHIP  67 

came  so  bad  that  the  growers  finally  formed  an  organization  of 
their  own,  in  1901  —  the  California  Fresh  Fruit  Exchange. 
This  oo-operative  organization  of  deciduous  fruit  growers  ar- 
ranged for  the  handling  of  their  products  in  eastern  markets  by 
the  agents  maintained  in  those  markets  by  the  Southern  Cali- 
fornia Fruit  Exchange,^^  the  co-operative  organization  of  citrus 
fruit  growers.  This  arrangement  was  renewed  for  the  season  of 
1902 ;««  but  during  the  seasons  of  1903  and  1904,  when  the 
Southern  California  Fruit  Exchange  was  merged  into  the  Cali- 
fornia Fruit  Agency,  the  California  Fresh  Fruit  Exchange  oper- 
ated through  the  California  Fruit  Distributors,  an  organization 
of  commercial  shipping  firms,  which  had  succeeded  the  California 
Fruit  Growers  and  Shippers'  Asociation  in  1902.®^  However, 
this  alliance  of  growers  with  dealers  proved  incompatible,^^  and 
in  February,  1905,  arrangements  were  again  made  by  the  Cali- 
fornia [Fresh]  Fruit  Exchange  for  the  handling  of  their  prod- 
ucts by  the  agents  of  the  Southern  California  Fruit  Exchange.^^ 
The  co-operative  organization  of  deciduous  fruit  growers  has 
continued  to  have  the  products  of  its  members  handled  by  the 
agents  of  the  co-operative  organization  of  citrus  fruit  growers 
ever  since  that  time;^*  and  the  arrangement  is  mutually  satis- 
factory, because  the  ideals  of  the  two  organizations  are  similar. 
In  the  raisin  industry,  attempts  to  combine  the  interests  of 
growers  and  commercial  packers  or  dealers  have  likewise  been 
unsatisfactoiy.  From  1889  to  1891  several  co-operative  packing 
associations  of  raisin  growers  had  been  formed  in  the  Fresno 
district.  In  1892,  these  co-operative  packing  associations  and  a 
number  of  ''commission  packers"  entered  into  certain  agree- 
ments with  the  growers  who  had  organized  the  California  State 

59  Minutes  of  Board  of  Directors,  Southern  California  Fruit  Exchange, 
Apr.  24,  1901. 

60  Minutes  of  Board  of  Directors,  Southern  California  Fruit  Exchange, 
May  28  and  June  4,  1902. 

61  Powell,   Fred   Wilbur,    ' '  Co-operative  Marketing   of   California  Fresh 
Fruit."     Quarterly  Journal  of  Economics,  1910,  Vol.  XXIV,  pp.  392-418. 

62  Personal  interview  with   Geo.   H.   Cutter,  Pres.   California  Fruit  Ex- 
change, July  20,  1916. 

63  Minutes  of  Board  of  Directors,  Southern  California  Fruit  Exchange, 
Jan.  11,  Feb.  8  and  15,  1905. 

84  Personal  interview  with  Geo.  H.  Cutter. 


68  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [68 

Raisin  Growers  Association,  in  reference  to  the  handling  of  the 
crop.  This  association  claimed  to  include  growers  representing 
95  per  cent  of  the  crop.  During  the  season,  price-cutting  became 
severe,  and  many  carloads  of  raisins  were  sold  at  a  price  that 
netted  the  growers  less  than  li^  cents  per  pound.  The  commission 
packers  and  co-operative  packers  in  the  Association  each  accused 
the  other  of  starting  the  price-cutting,  and  both  blamed  the  out- 
side packers.  In  April,  1893,  a  meeting  of  the  Association  was 
called  quietly,  and  an  executive  committee  favorable  to  the  com- 
mission packers  was  chosen.  The  growers  became  indignant  and 
proposed  a  co-operative  organization  of  growers  exclusively,  of 
which  the  existing  co-operative  associations  would  form  the 
nucleus.  In  June,  1893,  an  attempt  was  made  to  get  the  rival 
factions  together  —  the  executive  committee  of  the  California 
State  Raisin  Growers  Association  (which  was  dominated  by  the 
commission  packers),  and  those  who  favored  the  co-operative 
plan;  ''but  harmony  was  impossible.'* 

On  June  20,  1894,  the  California  Raisin  Growers  and  Packers 
Company  was  incorporated,  with  a  board  of  directors  consisting 
of  five  growers  and  five  packers.  Eighty  per  cent  of  the  raisin 
acreage  was  contracted  to  this  association.  Competition  from 
outside  packers  again  led  to  price-cutting,  in  which  the  co- 
operative packers  and  commercial  packers  each  again  accused 
the  other  of  making  the  start.  The  result  was  disaster  to  the 
growers,  and  many  vineyards  were  grubbed  out  in  1894  and  1895. 

Efforts  to  organize  the  raisin  growers  were  renewed  early  in 
1898.  Various  plans  were  suggested,  committees  appointed,  and 
an  organization  finally  effected,  under  the  name  of  the  California 
Raisin  Growers'  Association,  with  M.  Theo.  Kearney  as  presi- 
dent. 

In  the  original  plan  submitted  by  M.  Theo.  Kearney  for  the 
formation  of  the  California  Raisin  Growers'  Association,  ''the 
existing  plants  of  the  co-operative  associations"  were  to  be 
' '  taken  over  by  the  proposed  association,  and  as  rapidly  as  possi- 
ble packing  facilities"  were  to  "be  extended;"  commercial  pack- 
ers were  not  to  be  admitted  to  membership.  This  organization  was 
effected  in  time  to  handle  the  1898  crop,  though  75  per  cent  of 
the  packing  was  contracted  to  the  various  commercial  packers, 
in  proportion  to  their  packs  of  the  previous  season.     "Nearly  all 


69]  BASIS  OP  MEMBERSHIP  69 

the  packers  .  .  .  were  dissatisfied  with  their  allotments,'^ 
and  difficulty  was  experienced  in  enforcing  the  terms  of  the  con- 
tract. At  the  State  Fruit  Growers  Convention,  in  December, 
1898,  Mr.  Kearney  said:  ''Our  experience  this  season  has  con- 
vinced me  that  we  cannot  blend  the  interests  of  the  commercial 
packer  with  the  interests  of  the  grower,  any  more  than  we  can 
blend  oil  and  water,  and  that  any  attempt  on  our  part  to  do  so 
will  be  a  waste  of  time  and  will  be  engaging  in  a  very  hazardous 
undertaking. "  ®^  At  a  meeting  of  the  Association,  December  5, 
1898,  he  proposed  a  plan  whereby  the  Association  might  be  made 
independent  of  the  commercial  packers.  It  was  that  the  growers 
be  assessed  $5  per  acre  to  build  packing-houses  which  would  be 
operated  on  the  co-operative  plan.  This  move  was  opposed  by 
the  commercial  packers,  and  the  growers  lacked  sufficient  inde- 
pendence to  adopt  it. 

An  attempt  was  made  to  control  the  packers  by  very  stringent 
contracts  in  1899,  but  they  proved  to  be  not  subject  to  control. 
Therefore  in  the  spring  of  1900,  the  directors  of  the  growers* 
association  incorporated  the  California  Raisin  and  Fruit  Pack- 
ing Company,  and  sought  to  secure  three-year  contracts  with  the 
growers  preparatory  to  entering  the  packing  business.  But 
many  growers  did  not  think  it  wise  to  attempt  to  eliminate  the 
packers,  and  the  packers  were  not  disposed  to  be  eliminated; 
they  were  preparing  to  fight  the  growers,  when  the  bankers 
undertook  to  reconcile  the  opposing  factors.  The  packers  de- 
manded that  the  growers  give  up  the  packing-house  idea,  and 
give  them  a  three-year  contract  similar  to  that  already  in  force. 
After  several  meetings  of  the  bankers,  packers,  and  directors,  the 
packers  agreed  to  effect  a  combine  among  themselves  so  that  the 
growers'  association  would  deal  with  them  as  one  body,  and  the 
three-year  contracts  with  the  packers  were  signed,  with  some 
modifications  favorable  to  the  packers.  This  failure  of  the  grow- 
ers to  declare  their  independence  was  thus  commented  upon  by 
J.  W.  Jeffrey :«« 

''The  California  Raisin  Growers'  Association  has  been  having 
a  fight  for  its  life  for  the  past  two  or  three  months.     .     .     The 

65  Paciiic  Rural  Press,  Dec.  10,  1898,  p.  380. 

68  Jeffrey,  J.  W.,  ' '  Co-operation  vs.  Combination.  * '  Calif ornm  Cultivator, 
May  25,  1900,  p.  323. 


70  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [70 

campaign  of  the  last  few  months  has  been  along  the  lines  of  a 
steady  natural  gi'owth  of  the  co-operative  idea.  That  is  too  slow 
a  process  for  the  Fresno  growers,  although  the  experience  of  the 
orange  growers  and  the  failure  of  the  raisin  growers  themselves 
will  finally  convince  the  raisin  men  that  success  can  come  only 
through  independent  co-operation  among  themselves.  In  the 
fight  now  about  concluded  in  acknowledged  defeat  the  raisin 
association  has  attempted  to  seal  a  three-cornered  partnership 
between  themselves,  the  raisin  packers  and  the  bankers  of  Fresno 
and  San  Francisco,  and  it  has  been  an  attempt  to  divide  the 
spoils  .  .  .  between  the  three  parties  —  the  growers  to  get  a 
living  out  of  the  raisin  business  if  possible ;  the  packers  to  secure 
$12  to  $15  per  ton  .  .  .  without  risking  a  penny  in  the 
markets,  and  the  bankers  to  get  an  easement  on  the  raisin-land 
securities  on  which  they  had  advanced  money  when  the  packers 
were  handling  the  raisins  on  a  commission  that  left  less  than  IV2 
cents  a  pound  to  the  growers.  It  seems  very  strange  to  the  orig- 
inators and  friends  of  the  clean-cut,  independent  Exchanges  of 
Southern  California  that  a  tripartite  agreement  in  the  name  of 
co-operation  should  be  attempted,  between  the  raisin  growers,  the 
packer-speculators,  and  the  money-lenders." 

Following  this  compromise,  there  was  a  series  of  conflicts  be- 
tween the  interests  of  growers  and  packers,  including  the  revoca- 
tion of  contracts  by  the  growers'  association,  and  their  subse- 
quent renewal  on  terms  still  more  favorable  to  the  packers. 
This  latter  action  was  taken  by  the  directorate,  after  the  elim- 
ination of  Mr.  Kearney,  and  without  consultation  with  the  grow- 
ers. This  caused  much  dissatisfaction,  and  in  the  spring  of  1904, 
Mr.  Kearney  again  proposed  the  elimination  of  the  commercial 
packers  and  the  establishment  of  co-operative  plants,  all  repre- 
sented on  a  central  board;  but  this  was  never  done.  General 
distrust  and  dissatisfaction  among  the  growers  prevailed;  the 
packers  continued  to  dominate  the  situation;  the  growers  failed 
to  renew  their  contracts  w^ith  their  association,  and  on  August  8, 
1904,  the  president  of  the  California  Raisin  Growers'  Associa- 
tion announced  the  suspension  of  business.^^ 

67  This  brief  account  of  some  of  the  early  organizations  in  the  raisin  in- 
dustry is  based  largely  upon  data  contained  in  a  thesis  by  F.  Y.  Fox,  Co- 


71]  BASIS  OF  MEMBERSHIP  71 

During  the  existence  of  the  California  Raisin  Growers'  Asso- 
ciation there  was  almost  continual  conflict  between  the  interests 
of  the  growers  and  the  commercial  packers ;  and  the  disparity  of 
those  interests  contributed  largely  to  the  ultimate  downfall  of 
the  Association.  If  the  plan  repeatedly  proposed  by  Mr.  Kear- 
ney —  that  of  the  Association  doing  its  own  packing  —  had  been 
adopted  and  put  into  operation  early  in  the  life  of  the  organiza- 
tion, thus  severing  all  relations  with  the  commercial  packers,  it 
is  probable  that  the  raisin  growers  of  California  might  have  been 
spared  the  harrowing  experiences  which  characterized  the  period 
from  the  downfall  of  the  California  Raisin  Growers '  Association 
in  1904  to  the  inception  of  the  California  Associated  Raisin  Com- 
pany in  the  spring  of  1913.  ) 

Even  when  a  marketing  ^organization  is  started  strictly  as  a 
producers'  organization  without  any  intention  of  forming  an 
alliance  or  combination  with  dealers  in  the  same  product,  there 
is  always  danger  that  the  outside  interests  will  be. able  to  manip- 
ulate matters  in  such  a  way  as  to  secure  control  of  the  '* growers' 
organization"  and  dominate  its  policies,  unless  definite  provi- 
sions are  made  by  the  organization  to  insure  against  such  an 
eventuality.  A  good  illustration  of  what  may  happen  to  an 
organization  which  fails  to  take  such  precautions  is  furnished  by 
the  experience  of  the  Brawley  Cantaloupe  Growers'  Association 
which  was  organized  in  1905  —  the  second  year  that  cantaloupes 
were  grown  in  the  Imperial  Valley.  This  was  an  incorporated 
company,  with  capital  stock,  and  was  composed  principally  of 
growers,  nearly  all  of  whom  were  Americans.  But  the  American 
growers  gradually  went  out  of  the  cantaloupe  business  and  Jap- 
anese came  in.  The  retiring  growers  sold  their  stock  in  the 
association.  An  eastern  firm  of  cantaloupe  distributors  quietly 
bought  up  the  stock  as  it  was  offered,  and  soon  controlled  a 
majority  of  the  shares.  After  that,  the  policies  of  the  Associa- 
tion were  determined  by  these  dealers  rather  than  by  the 
growers.^^ 

operation  in  the  Baisin  Industry  of  California,  University  of  California, 
1912 ;  and  quotations  not  otherwise  specified  are  from  this  work. 

68  Personal  interview  with  Peter  P.  Hovley,  June  21,  1916.  Mr.  Hovley 
was  president  and  manager  of  the  Brawley  Cantaloupe  Growers'  Associa- 
tion during  its  entire  shipping  activity  (1905-1911). 


72  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [72 

Recognizing  the  necessity  of  making  definite  provision  for  in- 
suring that  control  over  the  affaii^  of  the  organization  shall  not 
pass  into  the  hands  of  outside  interests,  various  means  to  this 
end  have  been  adopted  by  different  organizations.  The  Cali- 
fornia Associated  Raisin  Company  and  the  California  Peach 
Growers  have  each  placed  the  control  of  their  policies  in  the 
hands  of  a  board  of  twenty-five  voting  trustees  ^^  elected  for  a 
period  of  seven  years,  and  the  Turlock  Merchants  and  Growers, 
Incorporated,  has  vested  similar  power  in  twenty  trustees  elected 
for  five  years.  No  matter  what  transfers  of  stock  may  take  place 
in  the  meantime,  all  voting  of  stock  during  that  period  is  vested 
in  the  trustees  elected  by  the  persons  who  owned  the  stock  at  the 
time  the  original  organization  was  effected.  No  provision,  how- 
ever, is  made  for  insuring  that  a  majority  of  the  stock  shall  be 
in  friendly  hands  at  the  expiration  of  the  five  or  seven-year 
period,  since  there  are  no  restrictions  whatever  on  the  purchase 
or  transfer  of  stock.  The  organization  of  olive  growers  known 
as  the  California  Associated  Olive  Growers  has  attempted  to 
obviate  this  difficulty  by  providing  for  the  issue  of  two  kinds  of 
stock  (common  and  preferred),  restricting  the  sale  of  common 
stock  to  growers,  and  providing  that  *'the  total  amount  of  pre- 
ferred stock  actually  issued  or  contracted  for  at  any  time  shall 
never  exceed  the  amount  of  two-thirds  of  the  total  common  stock 
then  actually  issued. ' ' '° 

Other  organizations  have  accomplished  the  same  result  by  per- 
mitting transfers  of  stock  only  upon  approval  of  the  board  of 
directors.  However,  the  most  effective  means  of  insuring  that 
the  control  of  an  organization  shall  remain  with  the  growers  is 
the  absolute  restriction  of  membership  in  the  organization  or 
ownership  of  stock  to  actual  growers  of  the  product  to  be  mar- 
keted. This  method  has  been  adopted  by  the  California  Fruit 
Exchange  and  practically  all  its  local  associations,  most  of  the 
local  associations  composing  the  California  Fruit  Growers  Ex- 
change, and  all  the  local  associations  comprising  the  California 
Almond  Growers  Exchange  and  the  California  Walnut  Growers 
Association. 

On  the  whole  it  appears  to  be  very  much  more  desirable  that 

6»  Documents  secured  from  oflScers  of  the  organizations. 
70  California  Fruit  News,  June  17,  1916,  p.  4. 


73]  BASIS  OF  MEMBERSHIP  73 

membership  or  ownership  of  stock  in  a  growers'  co-operative 
marketing  organization  be  limited  to  actual  growers  of  the  com- 
modity to  be  marketed,  rather  than  that  membership  be  trans- 
ferable without  restriction,  or  that  stock  be  transferable  except 
to  other  actual  growers  and  upon  explicit  approval  of  the  direc- 
tors of  the  organization.  It  further  appears  that  combinations 
or  alliances  of  growers '  organizations  with  organizations  of  com- 
mercial packers  or  dealers  are  extremely  likely  to  be  detrimental 
to  the  best  interests  of  the  growers. 


CHAPTER  IV 

FINANCING  THE   ORGANIZATION,   DISTRIBUTION  OF 
BENEFITS,  AND  BASIS  OF  VOTING 

FINANCING  THE  ORGANIZATION 

Definite  provision  must  he  made  for  financing  the  business  of 
the  organization. 

The  amount  of  money  that  must  be  raised  for  equipping  a  co- 
operative marketing  organization  and  maintaining  its  operations 
depends  not  only  upon  the  volume  of  the  product  to  be  handled, 
but  to  an  even  greater  extent  upon  the  nature  of  the  product, 
and  the  methods  of  handling  and  marketing  to  be  employed. 
In  the  citrus  industry,  where  each  local  association  requires  a 
packing-house  with  elaborate  equipment,  the  initial  expenditure 
of  an  association  before  it  can  begin  to  handle  a  crop  is  neces- 
sarily much  greater  than  in  the  case  of  a  bean  growers'  associa- 
tion located  where  the  product  can  be  stored  in  public  ware- 
houses, or  even  an  almond  growers^  association,  which  can,  if 
necessary,  carry  on  its  operations  without  a  warehouse.  And 
after  the  equipment  has  been  installed,  the  amount  of  money 
needed  to  finance  each  season's  operations  will  depend  upon  the 
amount  of  labor  performed  by  the  organization  in  preparing  the 
product  for  market,  the  time  and  method  of  payment  made  to 
the  growers,  whether  or  not  the  output  is  handled  through  brok- 
ers or  through  salaried  representatives  of  the  organization  in  the 
markets,  and  whether  or  not  the  organization  has  created  a  re- 
serve fund  from  the  operations  of  previous  years.  In  any  case, 
before  an  organization  is  formed,  the  only  logical  method  to  pur- 
sue is  to  make  as  accurate  an  estimate  as  possible  of  the  probable 
financial  needs  of  the  proposed  organization,  and  to  include  in 
the  plan  of  the  organization  itself  a  definite  plan  for  securing  the 
necessary  funds. 

74 


75]  FINANCING,   BENEFITS,  AND  VOTING  75 

Various  means  of  securing  the  funds  have  been  employed.  In 
the  citrus  industry,  where  packing-houses  and  equipment  are 
necessary  to  handle  the  product  properly,  a  common  method  is 
for  the  local  association  to  organize  as  a  joint-stock  company,  in 
which  each  member  is  required  to  purchase  a  certain  amount  of 
stock  for  each  acre  of  his  orchard.  This  stock,  which  may 
amount  to  twenty-five  or  more  dollars  per  acre,  may  be  paid  in 
full  before  the  packing-house  is  erected,  but  the  more  usual  plan 
is  for  the  growler  to  pay  for  the  stock  gradually,  a  common 
method  being  for  the  association  to  retain  from  the  proceeds  of 
fruit  packed  and  sold  for  the  subscriber  a  small  sum  per  box 
(usually  not  to  exceed  five  cents)  until  the  stock  is  entirely  paid 
for.  This  may  result  in  the  distribution  of  the  payment  for 
stock  over  three  or  four  seasons ;  and  the  stock  is  paid  for  out  of 
the  proceeds  from  the  sale  of  the  fruit. 

Although  this  arrangement  results  in  eventually  paying  for 
the  packing-house  from  the  sale  of  stock  to  the  growers,  the 
money  for  its  erection  must  be  procured  in  some  other  way. 
Sometimes  it  may  be  borrowed  from  an  individual  member  of  the 
organization;  but  the  more  usual  method  is  to  borrow  it  from 
the  local  bank;  and  the  attitude  of  the  bank  in  a  given  locality 
regarding  the  financing  of  a  proposed  marketing  organization 
must  usually  be  ascertained  before  the  plans  for  the  organization 
have  proceeded  very  far.' 

When  an  organization  is  foraied  without  capital  stock,  it  must 
depend  for  funds  upon  advances  made  by  the  membei*s,  or  upon 
retaining  a  small  sum  for  each  box  of  fruit  handled,  and  apply- 
ing the  same  to  a  building  fund.  Unless  the  members  advance  the 
funds  the  money  for  erecting  the  building  must  be  procured 
from  outside  sources.  The  banks  have  been  more  favorably  dis- 
posed toward  loaning  money  for  the  erection  of  a  packing-house 
to  a  growers'  association  organized  with  capital  stock  than  one 
organized  without  capital  stock,  even  though  loans  to  the  latter 
be  secured  by  notes  bearing  the  signatures  of  the  entire  member- 
ship of  the  organization.  This  attitude  of  the  banks  has  resulted 
in  the  formation  of  many  associations  of  citrus  fruit  growers  on 
the  joint-stock  plan  where  the  non-capital-stock  plan  would 
doubtless  otherwise  have  been  employed.^ 

1  Personal  interview  with  B.  B,  Pratt,  Manager  Field  Department,  Cali- 
fornia Fruit  Growers  Exchange,  May  22,  1916. 


76  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [76 

No  matter  which  of  the  methods  above  mentioned  is  employed, 
the  growers'  association  eventually  owns  the  building,  and  each 
member  will  have  contributed  to  its  erection  and  equipment  in 
proportion  to  the  acreage  of  his  orchard  or  the  amount  of  fruit 
he  has  marketed  through  the  organization ;  and  such  an  arrange- 
ment is  as  equitable  a  one  as  could  be  made,  for  each  member 
has  contributed  to  that  part  of  the  support  of  the  organization 
in  proportion  to  the  service  it  has  rendered  him. 

Similar  means  have  been  employed  in  financing  the  erection  of 
packing-houses  in  other  industries.  In  the  Sebastopol  Apple 
Growers'  Union,  each  member  subscribed  for  one  share  ($10)  of 
stock  for  each  200  boxes  of  his  estimated  crop,  and  five  cents  per 
box  was  retained  from  the  sale  of  the  fruit  by  the  Union  in  pay- 
ment for  this  stock.  In  the  Sebastopol  berry  growers'  organiza- 
tion, each  member  subscribed  for  stock  in  proportion  to  his  acre- 
age, and  the  money  for  building  the  packing-house  was  advanced 
by  one  of  the  meniBers  at  6  per  cent  interest.^  About  half  the 
local  associations  of  almond  growers  which  constitute  the  Cali- 
fornia Almond  Growers  Exchange  own  and  operate  warehouses. 
These  were  built  or  purchased  with  money  advanced  by  growers 
or  borrowed  from  other  sources,  and  then  repaid  by  levying  a 
certain  charge  per  pound  on  all  almonds  handled  through  the 
house  until  the  required  amount  had  been  collected.  In  this  case, 
also,  the  contributions  of  the  various  members  toward  the  cost 
of  the  house  were  in  proportion  to  the  volume  of  product  the 
association  handled  for  each. 

The  ownership  of  a  packing-house  or  warehouse  by  a  local 
association  of  growers,  which  has  been  paid  for  by  contributions 
from  each  member  in  proportion  to  his  product,  not  only  affords 
the  association  adequate  facilities  for  handling  the  product  of 
its  members,  but  may  contribute  fully  as  much  to  the  welfare  of 
the  association  by  reason  of  its  serving  as  a  potent  force  in  bind- 
ing together  as  a  unit  the  members  of  the  organization. 

In  addition  to  money  for  packing-house  construction  and 
equipment,  each  marketing  organization  usually  needs  a  consid- 
erable sum  to  defray  operating  expenses,  especially  during  the 
early  part  of  each  season,  before  returns  from  the  sale  of  prod- 

2  Personal  interview  witli  I.  N.  Cable,  Manager,  Sebastopol  Berry  Grow- 
ers, Incorporated,  July  21,  1916. 


77]  FINANCING,  BENEFITS,  AND  VOTING  77 

ucts  become  available.  If  no  reserve  fund  has  been  created 
from  previous  seasons'  operations,  or  if  the  organization  is  a  new 
one,  this  money  must  usually  be  borrowed  for  a  longer  or  shorter 
period.  In  the  past  it  often  occurred  that  a  new  organization 
met  with  extreme  difficulty  in  arranging  for  short-time  loans  at 
the  commercial  banks.  This  was  especially  true  in  the  case  of  a 
central  marketing  organization  operating  on  the  non-capital- 
stock  plan,  and  composed  of  local  associations  operating  on  a 
similar  plan.  For  example,  the  California  Finiit  Exchange  had 
such  difficulty  in  securing  loans  from  the  banks  when  the  organ- 
ization was  operating  without  capital  stock,  that  they  were  forced 
to  reorganize  in  1907  as  a  joint-stock  company,  and  have  since 
been  able  to  procure  short-time  loans  without  difficulty  whenever 
needed.  The  California  Almond  Growers  Exchange,  in  the  first 
year  of  its  operations  (1910),  finding  itself  unable  to  negotiate 
loans  as  an  organization,  was  obliged  to  secure  the  $30,000  needed 
to  finance  its  operations,  by  notes  signed  by  individual  growers. 
However,  since  the  organization  has  demonstrated  its  ability  to 
meet  financial  obligations,  the  banks  are  anxious  to  accept  the 
privilege  of  making  any  advances  that  may  be  required  for 
handling  the  business.  The  California  Walnut  Growers  Asso- 
ciation also,  though  operating  without  capital  stock,  is  now  so 
favorably  considered  by  the  banks  that  it  is  able  to  borrow  any 
amount  of  money  it  may  need  for  carrying  on  its  business.  In 
fact,  the  banks  seem  to  be  becoming  much  less  prejudiced  against 
granting  short-time  loans  to  organizations  operating  without  cap- 
ital stock  than  was  formerly  the  case.  The  Southern  California 
Fruit  Exchange  and  its  successor,  the  California  Fruit  Growers 
Exchange,  have  always  been  able  to  borrow  whatever  money  they 
needed  each  season,  although  their  capital  stock  was  merely  nom- 
inal, consisting  of  only  as  many  shares  (at  one  dollar  each)  as 
there  were  directors.  It  would  seem  that  the  form  of  organiza- 
tion, rather  than  the  amount  of  capital  stock,  has  in  the  past  in- 
fluenced banks  in  their  attitude  toward  granting  accommodation 
to  growers'  co-operative  marketing  organizations.  However, 
since  the  permanent  nature  of  these  organizations  in  certain  in- 
dustries has  become  demonstrated,  there  is  less  discrimination 
against  non-capital-stock  organizations  in  reference  to  short-time 
loans  than  was  formerly  the  case. 


78  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [78 

Organizations  representing  certain  large  industries  have 
deemed  it  advisable  to  have  a  larger  amount  of  capital  stock  than 
could  conveniently  be  subscribed  for  by  the  growers  on  an  acre- 
age basis,  in  order  to  create  a  large  working  capital  and  thus 
render  themselves  less  dependent  upon  loans  secured  from  banks 
for  carrying  on  their  business.  Stock  subscriptions  for  $800,000 
were  secured  by  the  California  Associated  Raisin  Company  be- 
fore business  was  started,  and  for  $600,000  by  the  California 
Peach  Growers ;  and  larger  amounts  were  later  secured  by  both. 
The  California  Prune  and  Apricot  Growers,  Inc.,  in  process  of 
organization,  does  not  plan  to  undertake  business  unless  sub- 
scriptions to  stock  amounting  to  $750,000  are  secured.^  In  these 
organizations,  subscriptions  from  growers  have  been  solicited  to 
the  extent  of  their  willingness  and  ability  to  subscribe;  but  "all 
business  houses,  bankers  and  professional  men,  as  well ' '  *  have 
been  urged  to  participate  in  the  subscription  to  capital  stock. 
*'The  grower,'*  **the  public,"  and  "the  investor"  alike  have 
been  appealed  to  on  various  grounds,  in  the  efforts  to  secure  the 
desired  amounts.  Although  in  each  case  a  voting  trust  has  been 
created  to  prevent  hostile  interests  from  securing  control  over 
the  policies  of  the  organization  during  the  life  of  said  trust,  the 
admission  of  persons  other  than  growers  to  participation  in  the 
stock  subscriptions  introduces  a  factor  into  the  organization 
which  may  eventually  cause  serious  disturbance  because  of  the 
disparity  between  the  interests  of  persons  who  subscribe  for 
stock  as  an  investment  with  the  expectation  of  receiving  divi- 
dends and  those  who  subscribe  for  the  purpose  of  securing  mar- 
keting facilities  for  their  products.  The  admission  of  outside 
interests  into  a  growers'  organization  on  the  same  basis  as  the 
growers  themselves,  even  for  the  sake  of  securing  needed  finan- 
cial assistance,  is  soliciting  the  co-operation  of  those  whose  inter- 
ests render  it  impracticable  for  them  truly  to  co-operate,  unless 
it  be  assumed  that  all  participants  other  than  growers  in  the 
subscriptions  for  stock  are  actuated  by  philanthropic  motives  or 
expect  to  be  indirectly  recompensed  for  their  contributions  by 
reason  of  the  increased  prosperity  of  the  community  due  to  the 

3  Subscription  and  Voting  Trust  Agreement. 

*  In  document  circulated  during  campaign  for  subscriptions  to  the  stock 
of  the  California  Associated  Raisin  Company. 


79]  FINANCING,  BENEFITS,  AND  VOTING  79 

existence  of  the  better  marketing  facilities  provided  by  the 
organization.  When  with  the  receipt  for  money  furnished  by 
persons  other  than  growers,  a  growers'  organization  must  grant 
the  privilege  of  participation  in  the  determination  of  its  policies, 
or  create  an  artificial  barrier  within  its  own  organization  to  pre- 
vent such  participation,  and  thereby  prevent  also  the  exercise  of 
initiative  on  the  part  of  the  entire  membership  except  at  inter- 
vals of  five  or  seven  years,  the  organization  is  in  danger  of  no 
longer  remaining  a  co-operative  growers'  organization,  but  be- 
coming in  reality  an  amalgamation  in  which  the  welfare  of  the 
growers'  interests  is  dependent  upon  the  dictation  of  the  small 
body  of  men  whom  all  subscribers  (growers  and  others  alike) 
have  elected  for  a  period  of  years  by  a  vote  based  upon  the 
amount  of  their  stock  subscriptions. 

Although  it  has  been  officially  stated  that  90  per  cent  of  the 
stockholders  in  the  California  Associated  Raisin  Company  **are 
growers,  at  least  9  per  cent  are  business  men  whose  interest  in 
the  growers  far  outweighs  any  interest  they  may  have  in  profit 
from  the  stock,  and  not  more  than  1  per  cent,  if  any  at  all,  are 
men  who  would  be  willing  to  prostitute  this  organization  for  an 
advantages  to  themselves  as  stockholders ; "  ^  and  that  ' '  Between 
90  and  95  per  cent  of  the  stock  is  owned  by  growers  and  the  bal- 
ance is  owned  by  business  men  living  in  Fresno  and  the  sur- 
rounding towns  who  could  afford  to  lose  many  times  over  the 
value  of  their  stock  rather  than  to  see  the  raisin  industry  revert 
to  the  condition  of  years  gone  by ;  "^  nevertheless,  the  leaders  in 
this  organization  clearly  recognize  the  existence  of  the  possibility 
of  the  stock  passing  into  hostile  hands.  Their  attitude  in  this 
matter  is  indicated  by  the  manner  in  which  they  have  urged  the 
growei*s  to  retain  possession  of  all  their  stock  in  the  Company. 
For  example,  in  the  same  article  with  the  first  quotation  given 
above,  appeared  the  following  message  to  growers:  ''While  we 
are  on  this  subject,  allow  us  to  urge  every  grower  to  keep  his 
stock  .  ^ .  .  keep  it  as  an  insurance  on  your  vineyard  invest- 
ment. Just  for  the  same  reason  that  you  pay  out  money  to 
insure  your  house  and  your  life,  you  should  carry  this  stock  and 
not  allow  it  to  be  gathered  up  by  people  who  might  use  it  for 

5  Sun-Maid  Herald,  Feb.,  1916,  p.  2. 
»  Sun-Maid  Herald,  Mar.,  1916,  p.  3. 


80  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [80 

their  own  advantage.''  Again,  in  the  May  (1916)  issue  of  the 
Sun-Maid  Herald,''  under  the  caption,  *'An  Urgent  Request," 
appeared  the  following : 

** Don't  sell  your  stock.  It  don't  make  any  difference  what 
you  can  get  for  it,  keep  it.  As  long  as  this  stock  remains  in  the 
hands  of  the  growers,  the  industry  is  on  a  good  footing ;  when  it 
leaves  your  hands  and  goes  into  the  hands  of  a  speculator,  it 
may  become  dangerous. ' '  ® 

If  sufficient  funds  to  finance  a  given  organization  cannot  con- 
veniently be  secured  from  subscriptions  of  growers  on  the  basis 
of  acreage  or  volume  of  product,  or  borrowed  from  banks,  and 
the  issuing  of  shares  of  stock  on  other  than  an  acreage  or  volume 
basis  becomes  necessary,  the  sale  of  such  stock  should  be  limited 
to  growers  of  the  product  to  be  marketed,  the  stock  should  be 
transferable  only  to  growers,  and  the  amount  of  stock  which  may 
be  owned  by  an  individual  or  firm  should  be  limited.  This 
method  has  been  adopted  by  the  California  Fruit  Exchange. 
Stock  is  sold  only  to  deciduous  fruit  growers  who  are  members 
of  the  local  associations  which  compose  the  Exchange  or  to  these 
associations  themselves;  and  the  amount  of  stock  which  may  be 
held  by  one  individual,  corporation,  or  association  is  limited  to 
ten  shares  at  $100  per  share.® 

If,  however,  there  is  not  sufficient  available  capital  represented 
in  the  industry  to  render  feasible  this  method  of  procuring  funds 
for  the  organization,  and  such  subscriptions  as  can  reasonably  be 
levied  upon  an  acreage  basis  are  inadequate  to  meet  the  contem- 
plated needs  of  the  organization,  when  supplemented  by  as  much 
accommodation  as  the  local  banks  are  willing  to  grant,  the  situa- 
tion is  not  one  which  demands  an  appeal  to  outside  interests  to 
enter  the  organization  with  their  capital,  but  rather  one  which 
demands  a  revision  of  the  plans  regarding  the  scope  and  methods 
of  operation  of  the  organization,  particularly  in  the  direction  of 
curtailing  the  need  for  large  amounts  of  capital  in  advance  of 

f  The  Sun-Maid  Herald  is  a  "  house  organ ' '  published  by  the  California 
Associated  Raisin  Co.     It  has  been  issued  monthly,  since  Aug.,  1915. 

8  Sun-Maid  Herald,  May,  1916,  p.  2. 

9  Address  of  J.  L.  Nagle,  General  Manager,  California  Fruit  Exchange, 
at  Berkeley,  Cal.,  Dec.  11,  1916.  See  also  By-Laws  of  the  California  Fruit 
Exch<inge,  Article  XIV. 


81]  FINANCING,   BENEFITS,   AND  VOTING  81 

the  sale  of  products.  But  as  already  suggested,  a  favorable  atti- 
tude on  the  part  of  the  local  banks  toward  a  growers'  co-opera- 
tive organization  is  a  very  desirable  business  asset,  and  the  exist- 
ence or  non-existence  of  such  attitude  in  a  given  locality  should 
be  ascertained  before  organization  is  effected. 

DISTRIBUTION    OF   BENEFITS 

The  benefits  accruing  from  membership  in  the  organization 
should  be  distributed  among  the  members  in  proportion  to  the 
value  of  the  products  handled  for  each. 

In  an  ordinary  joint-stock  corporation,  the  surplus  profits  are 
distributed  to  the  members  (stockholders)  as  dividends  in  pro- 
portion to  the  amount  of  stock  held  by  each.  In  a  growers'  co- 
operative marketing  association  organized  as  a  joint-stoek  com- 
pany, in  which  the  stock  has  been  purchased  by  the  various  mem- 
bers in  proportion  to  their  respective  acreages  or  volumes  of  pro- 
duct, a  distribution  of  surplus  profits  would,  under  normal  con- 
ditions, be  fairly  equitable  whether  it  took  the  form  of  a  divi- 
dend based  on  the  shares  of  capital  stock  or  a  division  of  profits 
based  on  the  volume  or  value  of  the  products  handled  for  each 
member.  However,  there  is  some  preference  in  favor  of  making 
the  distribution  on  the  basis  of  the  value  of  the  products  handled, 
since  such  a  division  places  the  emphasis  upon  the  contribution 
of  products  from  year  to  year  to  support  the  business  of  the 
organization,  rather  than  upon  the  contribution  of  money  at 
some  previous  time,  and  also  encourages  the  production  not  only 
of  large  yields  per  acre,  but  also  of  high  grade  products,  since 
value  rather  than  volume  is  emphasized. 

In  a  fruit  growers'  organization  in  which  the  capital  stock  is 
held  in  amounts  disproportionate  to  the  acreage  or  products  of 
the  growers,  the  most  equitable  arrangement  in  the  distribution 
of  profits  is  to  limit  the  dividend  paid  on  the  capital  stock  to  a 
reasonable  rate  of  interest  on  the  paid-up  capital,  to  set  aside 
a  limited  amount  as  a  reserve  fun(^  and  to  divide  the  remainder 
among  the  growers  in  proportion  to  the  value  of  the  products 
they  have  marketed  through  the  organization  during  the  season. 
This  method  is  employed  hj  the  California  Fruit  Exchange, 
except  that  the  ten  per  cent  dividend  annually  declared  on  the 
capital  stock  is  a  little  high.     The  Turlock  Merchants  and  Grow- 


82  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [82 

ers,  Iiicoi^porated,  limits  the  dividend  on  paid-up  capital  stock 
to  five  per  cent  per  annum. 

In  the  case  of  organizations  without  capital  stock,  there  can,  of 
course,  be  no  dividends ;  and  since  these  organizations  are  oper- 
ated on  the  non-profit  plan,  there  can  also  be  no  profits  to  dis- 
tribute. A  common  plan  employed  in  operating  such  associa- 
tions is  as  follows:  The  expenses  are  estimated  as  closely  as 
possible,  and  a  suificient  amount  per  package  or  pound  to  create 
a  revenue  which  will  surely  cover  all  expenses  is  retained  by  the 
organization  when  making  remittances  to  the  growers.  At  the 
close  of  the  season,  when  the  total  expenses  for  the  year  are 
definitely  known,  the  actual  average  cost  of  handling  each  pack- 
age or  pound  of  product  can  be  determined,  and  any  excess 
which  may  have  been  charged  to  the  growers  is  returned  to  them 
in  proportion  to  the  number  of  packages  or  pounds  handled  for 
each,  unless  the  members  vote  to  have  this  sum  retained  in  the 
organization  as  a  reserve  fund  for  extending  the  equipment  or 
defraying  expenses  at  the  beginning  of  the  next  season.  In 
either  case,  the  grower  has  received  benefits  from  the  organiza- 
tion in  proportion  to  the  value  of  his  products,  for  the  cost  of 
marketing  has  been  upon  a  package  or  pound  basis,  and  hence 
the  grower  of  the  higher  grade  products  has  had  his  marketing 
done  at  a  lower  percentage  cost ;  and  here  again  the  production 
of  the  superior  grades  is  encouraged. 

It  is  equitable  to  place  the  charge  for  marketing  upon  a  pack- 
age or  pound  basis  rather  than  a  percentage  of  the  selling  price ; 
for  the  cost  of  preparing  the  low  grade  product  for  market  is  no 
less  than  that  of  preparing  the  high  grade ;  the  office  expense  of 
the  organization  in  the  handling  of  a  given  volume  of  products 
is  not  reduced  by  reason  of  the  grades  being  low  rather  than 
high;  and  the  cost  of  the  actual  selling  may  be  greater  for  the 
low  grade  product  in  the  case  of  goods  sold  by  salaried  agents, 
because  of  the  greater  difficulty  and  amount  of  time  that  may  be 
required  to  effect  sales.  # 

Some  organizations,  though  having  capital  stock  (which  is 
owned  by  growers  in  proportion  to  their  acreage  or  the  volume 
of  their  product) ,  operate  on  a  non-profit  basis,  but  consider  as 
a  part  of  the  operating  expense  six  per  cent  interest  on  the  paid- 
up  capital;  while  others,  like  the  Sebastopol  Apple  Growers' 


83]  FINANCING,  BENEFITS,  AND  VOTING  .  83 

Union,  pay  neither  dividends  nor  interest  on  capital,  but  give  the 
growers  (who  have  previously  contributed  the  capital)  the  direct 
benefit  of  the  further  reduction  in  the  cost  of  marketing  thus 
afforded.^° 

BASIS  OF  VOTING 

In  a  properly -constituted  growers*  co-operative  marketing  or- 
ganization, it  makes  little  difference  whether  the  voting  power  is 
hosed  upon  individ^ials  (one-man,  one-vote),  volume  of  product, 
or  shares  of  stock. 

It  has  already  been  shown  that  the  most  desirable  form  of.^ 
organization  is  one  in  which  the  shares  of  stock,  if  any,  are  held* 
by  the  growers  in  proportion  to  their  acreage  or  volume  of  pro-* 
duct.     In  such  organizations  it  is  ordinarily  assumed  that,  under 
normal  conditions,  there  will  be,  on  an  average  extending  over  a 
series  of  years,  a  fairly  close  relation  between  the  acreage  and 
■  the  volume  of  product.    Therefore,  whether  the  shares  of  stock 
are  issued  in  proportion  to  acreage  or  volume  of  product,  a  vote 
based  on  such  shares  of  stock  would,  under  normal  conditions, 
be  essentially  the  same  as  a  vote  based  on  volume  of  product. 

As  to  whether  the  voting  power  should  be  based  upon  in- 
dividuals or  upon  volume  of  product,  there  seems  to  be  some  dif- 
ference of  opinion,  it  being  held  by  some  that  true  co-operation 
demands  that  the  vote  of  each  individual  in  the  organization  have 
the  same  weight  regardless  of  differences  in  the  volume  of  prod- 
uct represented  by  the  various  members;  while  others  hold  as 
tenaciously  that  the  only  equitable  basis  of  voting  is  one  in  which 
the  vote  of  each  member  bears  the  same  relation  to  the  total  num- 
,  ber  of  votes  as  the  volume  of  his  product  bears  to  the  total 
product  represented  in  the  organization. 

It  is  true  that  when  an  organization  is  composed  of  individuals 
♦representing  widely  different  volumes  of  product,  or  a  central 
organization  is  composed  of  sub-organizations  differing  widely 
in  volume  of  product,  there  is  likely  to  be  a  tendency  on  the  part 
of  those  representing  the  larger  volumes  to  feel  that  their  in- 
terests may  suffer  because  of  inadequate  representation  unless 
they  are  granted  greater  voting  power  than  that  accorded  those 

10  Personal  interview  with  E.  C.  Merritt,  Manager,  Sebastopol  Apple 
Growers'  Union,  July  21,  1916. 


84  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [84 

representing  the  smaller  interests.  As  a  matter  of  fact,  however, 
the  influence  of  a  member  in  an  association,  or  of  a  representa- 
tive of  a  local  association  in  the  central  body,  in  bringing  about 
the  action  which  he  considers  most  conducive  to  the  welfare  of 
the  organization,  can  be  exerted  even  more  effectively  in  the  dis- 
cussion preceding  the  vote  than  by  the  act  of  voting.  Further- 
more, unless  there  is  sufficient  unanimity  existing  among  the 
members  of  the  organization  usually  to  render  the  result  of  a 
vote  the  same  whether  taken  on  the  basis  of  individuals  or  volume 
of  product,  there  is  serious  question  whether  the  aims  and  ideals 
of  the  various  members  are  sufficiently  alike  to  justify  their  be- 
longing to  the  same  co-operative  organization. 

Sometimes  large  and  influential  gi'owers,  in  localities  where 
their  volume  of  fruit  is  needed  to  insure  the  success  of  a  pro- 
posed organization,  decline  to  support  such  an  organization  if 
the  voting  is  to  be  by  individuals,  for  fear  of  being  overruled 
in  important  matters  by  a  majority  composed  of  the  lesser 
growers.  To  overcome  this  difficulty,  it  has  been  found  advan- 
tageous in  various  organizations  to  make  provision  for  voting 
according  to  volume  of  product,  upon  all  important  matters 
or  upon  demand  of  any  member.  Such  an  arrangement  removes 
the  grounds  for  objection  on  the  part  of  the  large  growers  or 
associations,  thus  resulting  in  the  establishment  of  stronger  or- 
ganizations than  would  otherwise  be  possible;  and  in  actual 
operation,  the  disparity  between  the  interests  of  large  and  small 
growers  which  may  have  been  assumed  to  exist,  largely 
disappears. 

Many  of  the  local  associations  of  citrus  fruit  gi^owers  which 
are  affiliated  in  the  California  FiTiit  Growers  Exchange,  provide 
for  a  vote  on  an  acreage  basis  or  on  the  basis  of  shipments  the 
preceding  season,  in  the  annual  election  of  directors,  and  in 
actual  practice,  often  elect  their  directors  by  an  almost  unanimous 
vote.^^  Also  in  some  of  the  district  exchanges  of  the  California 
Fruit  Growers  Exchange,  where  the  associations  differ  consider- 
ably in  the  amount  of  fruit  handled,  provision  is  made  for  voting 
on  a  volume  basis,  but  that  method  of  voting  is  rarely,  and  in  some 

11  Personal  interview  with  B.  B.  Pratt,  Manager,  Field  Department,  May 
22,  1916. 


85]  FINANCING,  BENEFITS,  AND  VOTING  85 


tal 
dpi 


exchanges  never  employed,  ^^  because  of  the  close  agreement  in 
opinion  arrived  at  in  all  important  matters  before  a  vote  is 
taken. 

When  the  Southern  California  Fruit  Exchange  (the  predeces- 
r  of  the  California  Fruit  Growers  Exchange)  was  organized, 
the  original  agreement  between  the  central  body  and  the  district 
exchanges  provided  that  ''Each  of  the  corporations  [district 
exchanges],  signers  to  this  agreement,  shall  be  entitled  to  one 
representative  on  the  Executive  Board,  who,  upon  any  call  of 
the  roll,  shall  be  entitled  to  one  vote  for  each  five  hundred  car- 
loads of  fruit,  or  major  fraction  thereof,  under  control  of  the 
corporation  represented  by  him ;  provided  that  each  representa- 
tive shall  be  entitled  to  at  least  one  vote."^^  Two  years  later 
a  change  was  made,  providing  that  ''In  all  meetings  of  the 
Board  of  Directors  of  party  of  the  first  part  [Southern  Cali- 
fornia Fruit  Exchange],  on  demand  of  any  member,  a  represen- 
tatives' meeting  shall  be  called  and  convened  the  same  day  and 
the  quCvStion  before  the  Board  submitted  to  such  meeting  at 
which  the  vote  shall  be  on  a  basis  of  a  total  vot«  of  one 
hundred  such  votes;  the  representatives  of  each  Exchange  shall 
be  entitled  to  one  vote  for  each  one  per  cent  of  the  expenses  of 
the  party  of  the  first  part  paid  by  such  Exchange  the  previous 
season.  .  .  ^  ^  ^^  ( This  was  a  vote  based  on  the  volume  of  fruit 
handled,  since  the  expenses  were  determined  on  a  box  basis.) 
In  1899,  provision  was  made  for  an  executive  committee  con- 
sisting of  one  representative  from  each  district  exchange,  and 
it  was  specified  that  "At  all  meetings  of  said  Executive  Com- 
mittee, upon  demand  of  any  one  or  more  members  thereof,  the 
vote  on  any  question  under  consideration  shall  be  taken  upon  a 
percentage  basis,  each  member  of  the  committee  to  have  the  same 
percentage  of  the  total  vote  as  the  party  [exchange]  appointing 
him  pays  to  the  assessments  levied  for  expenses,  in  accordance 

12  Personal  interview  with  P.  J.  Dreher,  Manager,  San  Antonio  Fruit  Ex- 
change, June  30,  1916. 

13  Minutes   of    Executive   Board,    Southern    California    Fruit   Exchange^ 
Sept.  18,  1895. 

1*  Minutes  of  Board  of  Directors,  Southern  California  Fruit  Exchange, 
July  28,  1897. 


86  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [86 

with  Section  five  of  this  agreement. '*  ^^  (The  assessments  for 
expenses  were  based  on  the  amount  of  fruit  shipped.)  Yet  votes 
on  a  representative  basis  as  indicated  in  any  of  these  provisions, 
were  taken  only  upon  two  occasions  during  the  entire  active 
existence  of  the  Southern  California  Fruit  Exchange;  and  in 
both  these  cases  the  results  were  the  same  as  they  would  have 
been  if  each  representative  had  cast  one  vote.^^ 

Also  in  the  California  Almond  Growers  Exchange,  it  is  pro- 
vided that  **The  right  of  each  and  eveiy  member  shall  be  a 
minimum  of  one  vote,  vdih  one  additional  vote  .  .  .  for  each 
ten  tons  of  almonds  over  the  first  ten  tons  marketed  by  the  mem- 
bers of  his  local  Association  the  previous  year.  .  .  .  All 
voting  shall  be  upon  the  minimum  basis  of  one  vote  to  each  mem- 
ber unless  a  vote  on  the  tonnage  basis  be  called  for  by  three  or 
more  voters. ' ' "  But  a  tonnage  vote  has  never  been  called  for 
during  the  seven  years  the  Exchange  has  operated.^® 

In  general,  it  may  be  said  that  where  harmony  prevails,  the 
basis  of  voting  is  immaterial ;  and  where  it  does  not  prevail  other- 
wise, there  is  little  chance  of  its  being  introduced  by  resort  to 
some  particular  method  of  voting.   ) 


15  Minutes  of  Board  of  Directors,  Southern  California  Fruit  Exchange, 
July  26,  1899. 

16  Minutes  of  Board  of  Directors,  Southern  California  Fruit  Exchange, 
May  24,  1899,  and  Feb.  14,  1900. 

17  By-Laws  of  the  California  Almond  Growers  Exchange,  Article  V,  sec- 
tions 2  and  3. 

18  Taylor,  R.  H.,  "Marketing  California  Almonds."  T/j-e  University  of 
California  Journal  of  Agriculture,  Oct.,  1916,  pp.  44-45. 


^  CHAPTER  V 

SOME  ESSENTIAL  DETAILS 

AFFILIATION  OF  LOCAL  ORGANIZATIONS 

For  the  purpose  of  marketing  the  product  of  a  large  horti- 
cultural industry,  an  affiliation  of  local  organizations  is  prefer- 
able to  a  single  large  organization  made  up  directly  of  individual 
growers.  In  such  an  affiliation,  the  identity  of  each  local  should 
he  preserved  and  its  interests  fully  represented  in  the  central 
organization. 

The  necessity  of  similarity  of  interests  and  the  desirability  of 
mutual  acquaintance  among  the  persons  composing  a  co-operative 
marketing  organizations  have  already  been  mentioned.^  The 
growers  of  a  given  commodity,  located  within  a  restricted  area, 
have  more  interests  in  common  and  very  much  greater  oppor- 
tunity for  mutual  acquaintance  than  have  individuals  residing 
in  different  districts.  However,  additional  economies  in  market- 
ing can  be  secured  and  a  more  comprehensive  distribution  of 
the  product  attained  if  some  general  marketing  plan  is  entered 
into  by  the  growers  of  the  same  product  in  different  localities. 
Such  an  arrangement  can  be  effected,  and  at  the  same  time  all 
the  advantages  of  the  local  organization  retained,  if  the  central 
organization  is  composed  of,  and  its  policies  determined  by,  rep- 
resentatives from  the  various  locals;  provided  such  representa- 
tives meet  at  sufficiently  frequent  intervals  in  the  discharge  of 
their  duties  to  become  fully  acquainted  with  one  another.  This 
plan  retains  the  personal  element  throughout  the  organization; 
it  gives  each  local  a  vital  and  personal  connection  with  the  affairs 
of  the  organization  as  a  whole ;  and  serves  to  keep  each  member 
of  a  local  in  much  closer  touch  with  the  work  and  policies  of 
the  organization  than  would  be  possible  if  the  larger  organiza- 

1  See  pp.  51-52. 

87 


88  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [88 

tion  were  made  up  directly  of  individual  growers  distributed  over 
a  wide  territory.  In  the  latter  case  meetings  of  the  membership 
would  be  infrequent,  acquaintanceship  never  fully  established, 
and  the  determination  of  the  policies  of  the  organization  left 
largely  to  a  few  individuals  without  reference  to  the  specific 
needs  or  wishes  of  the  membership  in  particular  localities.  When 
each  representative  in  the  central  body  is  elected  by  a  local 
organization  from  among  its  own  membership,  the  interests  of 
the  growers  composing  a  given  local  receive  a  much  more  i)er- 
sonal  representation  than  when  the  governing  body  of  the  central 
organization  is  elected  by  a  general  vote  of  all  the  growers. 
Each  representative  is  then  in  close  touch  with  the  needs  and 
desires  of  the  growers  he  represents  and  the  policies  determined 
will  more  nearly  reflect  the  thought  of  the  membership  as  a 
whole  than  if  they  were  detennined  by  a  group  of  persons  elected 
by  the  entire  membership  voting  en  masse.  And  the  feeling  on, 
the  part  of  the  individual  members  that  they  have  personal  rep- 
resentation in  the  affairs  of  the  organization  is  vital  to  the  per- 
manent success  of  a  co-operative  enterprise;  for  in  a  truly  co- 
operative enterprise,  it  is  a  case  of  the  members  controlling  the 
organization  rather  than  the  organization  controlling  the 
members. 

Different  methods  have  been  employed  by  the  growers  in 
different  industries  to  secure  representation  of  all  the  local  asso- 
ciations in  the  central  organization  without  making  the  govern- 
ing body  so  large  as  to  be  cumbersome.  In  the  California  Finiit 
Exchange  (which  suffers  the  disadvantage  of  being  a  joint-stock 
company  in  which  part  of  the  stock  is  held  by  each  of  the  twenty- 
eight  local  associations  and  part  by  individual  growers,  and  in 
which  the  eleven  directors  are  elected  by  the  stockholders  voting 
on  the  basis  of  shares  of  stock),  provision  is  made  that  *'Each 
Growers'  Organization  [i.  e.  local  association]  .  .  .  not  rep^ 
resented  on  the  Board  of  Directors  .  .  .  shall  be  entitled  to 
select  from  its  membei'ship  some  one  to  sit  with  this  Board  at  all 
its  sessions,  to  be  known  as  an  Associate  Director,  and  enjoy  all 
the  privileges  of  a  regular  Director  except  in  voting.  He  shall  be 
certified  to  this  Board  by  the  organization  which  selects  him."^ 

2  By-Laws  of  the  California  Fruit  Exclmnge,  Article  V  a. 


89]  SOME  ESSENTIAL  DETAILS  89 

In  the  California  Almond  Growers  Exchange  each  of  the 
twenty  local  associations  elects  a  representative  "who  shall  pay 
a  membership  fee  of  one  dollar,  to  this  corporation  and  be  a 
member  of  this  corporation  and  represent  his  loeal  Association 
in  this  corporation  until  the  election  by  such  local  Association  of 
some  other  person  as  a  member  of  this  corporation  in  his  place 
and  stead.  Upon  the  election  by  a  local  Association  of  a  successor 
to  its  member  in  this  Association  such  successor  becomes  a  mem- 
ber in  this  corporation  in  the  place  and  stead  of  the  person  he 
is  elected  to  succeed,  whose  membership  thereupon  expires. ' '  ^ 
' '  No  member  of  this  corporation  may  be  removed  except  by  the 
local  Association  which  elected  him."  *  ''Each  and  every  mem- 
ber of  this  corporation  may  be  present  at  all  Directors'  meetings 
and  participate  in  the  deliberations  thereof  the  same  as  a  Di- 
rector, and  enjoy  all  the  privileges  of  a  Director  except  such  as 
are  reserved  to  Directors  by  the  Statutes  of  the  State  of  Cali- 
fornia. ' '  ^  These  representatives  in  annual  meeting  elect  from 
among  their  number  five  directors,  who  formally  conduct  the  af- 
fairs of  the  organization ;  but  the  facts  that  the  representatives 
may  participate  in  the  deliberations  at  all  directors'  meetings; 
that  special  meetings  of  the  representatives,  as  such,  must  be 
called  by  the  president  "on  the  written  request  of  three  (3)  or 
more  members ; ' '  that  the  most  important  business  of  the  organ- 
ization is  always  transacted  at  meetings  of  representatives  rather 
than  directors,  and  that  each  local  association  requires  its  repre- 
sentative to  report  regularly  to  its  own  board  of  directors  re- 
garding his  acts  as  such  representative,  indicate  that  the  deter- 
mination of  the  policies  of  the  organization  rests  largely  in  the 
hands  of  the  local  associations  acting  through  their  representa- 
tives rather  than  in  the  hands  of  the  small  board  of  directors. 

The  California  Fruit  Growers  Exchange  is  composed  of  162 
local  associations*  which  are  grouped  into  seventeen  district 

^By-Laws  of  the  California  Almond  Growers  Exchange,  Article  V,  Sec- 
tion 1. 

^  By -Laws  of  the  California  Almond  Growers  Exchange,  Article  XV, 
Section  2. 

5  By-Laws  of  the  California  Almond  Growers  Exchange,  Artivle  V,  Sec- 
tion 4. 

6  Animal  Report  of  General  Manager,  California  Fruit  Growers  Eaf- 
change,  Aug.  31,  1^16,  p.  3. 


90  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [90 

exchanges.  Each  local  association  elects  one  of  its  members  as  a 
director  in  the  district  exchange  with  which  it  is  affiliated,  and 
each  of  the  seventeen  district  exchanges  elects  one  member  of  the 
board  of  directors  of  the  central  exchange.  The  board  of  di- 
rectors of  the  central  exchange  meets  regularly  eveiy  week,  and 
in  case  any  member  finds  it  impossible  to  be  present,  he  advises 
his  district  exchange  in  advance  and  writes  out  his  resignation. 
This  resignation,  together  with  a  recommendation  certifying 
another  member,  is  forwarded  by  the  secretary  of  the  given  dis- 
trict exchange  to  be  presented  at  the  meeting  of  the  board  of  di- 
rectors of  the  central  exchange.  At  the  opening  of  the  meeting, 
the  resignation  is  accepted  by  the  board  and  the  new  member 
elected  to  fill  the  vacancy.  He  in  turn  resigns  as  soon  as  the  reg- 
ular member  is  able  again  to  occupy  his  place,  even  though  the 
substitution  may  be  for  only  one  meeting.  Thus,  full  representa- 
tion of  the  district  exchanges  is  maintained  on  the  board.  The 
local  associations  composing  each  district  exchange  are  for  the 
most  part  located  within  a  rather  restricted  area,  and  each  local 
association  keeps  in  close  touch  with  its  district  exchange,  and 
makes  known  its  desires  through  its  member  on  the  board  of  di- 
rectors of  that  exchange.  Thus  there  exists  a  complete  chain  of 
personal  representation  from  the  individual  grower  to  the  cen- 
tral exchange;  and  the  interests  of  the  8,000  members  are  ade- 
quately protected. 

Contrasted  with  this  method  of  organization  for  determining 
the  policies  to  be  employed  in  marketing  the  product  of  a  large 
horticultural  industry,  is  that  practiced  in  the  raisin  industry. 
Although  local  associations  of  raisin  growers,  formed  for  the 
purpose  of  packing  their  product,  were  organized  as  early  as 
1889,  and  although  from  time  to  time  suggestions  were  made  that 
a  general  organization  based  upon  such  local  associations  as  units 
and  in  which  each  local  should  be  represented  would  solve  the 
problem  of  organization  for  marketing  the  raisin  crop,  both  the 
organization  which  existed  from  1898  to  1904  and  the  present 
organization  were  formed  on  an  entirely  different  plan.  In  the 
old  organization,  each  of  the  5,000  growers  had  one  vote  in  mass 
meeting^  for  the  election  of  the  five  directoi^s  who  conducted 

7  Personal  interview  with  Wylie  M.  Giffen,  July  18,  1916. 


91]  SOME  ESSENTIAL  DETAILS  91 

the  business  of  the  organization ;  and  except  at  the  annual  meet- 
ing or  occasional  special  meetings  the  growers  had  no  voice  in 
the  affairs  of  the  Association.  In  the  present  organization,  the 
California  Associated  Raisin  Company,  the  stockholders,  including 
growers  and  others,  voting  on  the  basis  of  shares  of  stock  held, 
elected  twenty-five  trustees  —  five  each  from  five  districts,  though 
the  voting  for  trustees  from  each  district  was  not  restricted  to 
stockholders  residing  in  that  district.  The  trustees  were  elected 
for  a  period  of  seven  years,  and  they  annually  elect  a  board  of 
seven  directors  from  among  their  number.  The  trustees  meet 
in  an  advisory  capacity  once  in  three  months,  and  the  directors 
meet  once  a  week;®  but  the  stockholders,  including  the  growers, 
have  no  further  official  voice  in  the  affairs  of  the  organization 
till  the  close  of  the  seven  year  period.  There  are  no  local  asso- 
ciations, the  members  of  which  can  talk  matters  over  and, 
through  their  ofificial  representatives,  make  their  influence  felt 
in  the  central  body. 

The  California  Peach  Growers  is  an  organization  formed  on 
essentially  the  same  plan  as  the  California  Associated  Raisin 
Company.  Those  who  took  the  lead  in  the  organization  were 
located  in  the  Fresno  district  (the  stronghold  of  the  raisin  in- 
dustry), were  familiar  with  the  workings  of  the  Raisin  Company, 
and  felt  that  the  methods  employed  in  the  conduct  of  that  or- 
ganization were  applicable  to  the  dried  peach  industry  also.  Al- 
though this  organization,  as  soon  as  it  was  ready  for  business, 
secured  control  of  a  packing-house  in  each  of  the  principal 
peach-producing  regions,®  no  local  associations  were  formed  con- 
tiguous to  those  packing-houses.  Each  of  the  6,000  peach 
growers  is  presumed  to  vote  for  trustees  once  in  seven  years, 
and  leave  the  management  of  '*his'^  marketing  organization  to 
those  tiTistees  and  the  directors  they  may  elect  from  among  their 
number. 

The  California  PiTine  and  Apricot  Growers,  Inc.,  is  organizing 
on  the  same  general  plan,  though  the  state  is  divided  into  seven 
districts  for  the  election  of  trustees,  two  of  whom  are  to  be 

8  Personal  interview  with  Wylie  M.  Giffen,  President,  California  Asso- 
ciated Eaisin  Co.,  July  18,  1916. 

9  Personal  interview  with  J.  F.  Niswander,  Manager,  California  Peach 
Growers,  July  18,  1916. 


92  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [92 

elected  from  each  of  six  districts  and  twelve  from  the  district 
comprising  the  Santa  Clara  Valley  and  adjacent  territory.  In 
addition  to  the  twenty-four  trustees  elected  by  the  stockholders, 
one  is  to  be  appointed  by  the  st^te  market  director.  All  are  to 
hold  office  for  seven  years,  and  do  all  the  voting  of  shares  of 
stock  that  is  done  in  the  meantime.^** 

It  is  unfortunate  that  organizations  of  fruit  industries  re- 
cently effected  and  now  in  process  of  formation  should  have 
adopted  this  plan  of  having  one  large  organization  made  up 
directly  of  individual  growers  who  have  no  voice,  whatever  in 
the  affairs  of  the  organization  except  at  long  intervals.  In- 
fluenced by  the  apparent  success  of  the  California  Associated 
Raisin  Company,  the  peach  growers  and  prune  and  apricot 
growers  have  patterned  their  respective  organizations  largely 
after  the  plan  adopted  for  the  raisin  industry.  This  plan  of 
organization  is  lacking  in  the  i)ersonal  touch  which  is  essential 
to  the  permanent  success  of  a  co-operative  enterprise;  and  it  is 
a  serious  question  how  long  organizations  formed  on  this  basis 
will  be  able  to  persist. 

BUSINESS  ABILITY   NEEDED 

Edch  organization  must  possess  —  represented  either  in  its 
memhership  or  its  employees  —  a  degree  of  administrative  ability 
and  business  acumen  commensurate  with  the  volume  of  the  busi- 
ness to  be  transacted  and  the  intricacy  of  the  problems  to  be 
solved. 

In  a  co-operative  marketing  organization,  although  the  various 
members  are  engaged  in  producing  the  same  commodity,  there 
may  be  considerable  difference,  not  only  in  their  skill  as  pro- 
ducers, but  also  in  their  general  breadth  of  view,  and  capacity 
for  large  undertakings.  When  a  co-operative  marketing  enter- 
prise develops  in  a  nonnal  manner,  as  a  result  of  initiative  on 
the  part  of  the  growers  of  a  given  product  in  a  community,  it 
is  natural  that  during  the  progress  of  organization  certain  indi- 
viduals should  grasp  the  significance  of  the  movement  more 
readily  than  others,  and  show  a  capacity  for  overcoming  the 
obstacles  that  may  arise.     That  is,  the  natural  leaders  in  the 

10  Subscription  and  Voting  Trust  Agreement,  being  circulated  during 
organization  campaign. 


93]  SOME  ESSENTIAL.  DETAILS  93 

community  will  manifest  themselves,  if  they  have  not  previously 
done  so.  While  it  is  true  that  organizing  ability  does  not  neces- 
sarily imply  the  existence  of  ability  to  sustain  an  organization 
once  formed,  nevertheless  it  is  approximately  true  that  within  a 
given  community  those  who  are  responsible  for  effecting  an  or- 
ganization are  likely  to  be  the  ones  who  will  have  to  take  the 
lead  in  detennimng  its  policies,  planning  its  operations,  and  de- 
fending it  against  any  outside  attacks.  One  of  the  important  ad- 
vantages of  an  organization  originating  with  the  growers  them- 
selves in  a  given  community,  rather  than  as  the  result  of  efforts 
of  a  professional  organizer  from  outside,  is  that  those  who  have 
thought,enough  of  the  organization  to  spend  time  and  energy  in  its 
formation  are  still  there  to  foster  its  development.  Unless  the  com- 
munity possesses  men  of  sufficient  foresight  and  ability  to  effect 
the  organization,  determine  its  policies,  and  sustain  its  activities, 
without  interference  from  outside  sources,  except  suggestions 
from  similar  organizations  or  the  central  body  with  which  the 
local  association  expects  to  affiliate,  it  is  doubtful  whether  that 
particular  locality  is  yet  ready  for  a  co-operative  marketing 
enterprise. 

However,  while  the  policies  of  the  organization  will  be  deter- 
mined largely  by  the  leaders  among  the  members,  and  its 
permanence  will  depend  much  upon  their  intelligent  support; 
such  members,  being  growers,  can  usually  give  only  a  fraction 
of  their  time  directly  to  the  affairs  of  the  organization,  and  the 
detailed  management  of  the  business  and  execution  of  the  policies 
agreed  upon  must  usually  be  entrusted  to  a  manager  who  is 
hired  to  devote  his  whole  time  (at  least  during  the  shipping 
season)  to  the  interests  of  the  organization.  Much  depends  upon 
the  selection  of  a  manager  with  sufficient  business  ability  and 
experience  to  handle  efficiently  the  matters  entrusted  to  his  care. 
The  larger  the  aggregate  amount  of  business  of  a  given  kind, 
the  more  capable  the  manager  needed.  In  a  new  organization 
made  up  principally  of  growers  with  small  acreages,  but  whose 
aggregate  output  is  large,  there  is  likely  to  be  a  general  lack  of 
appreciation  of  the  type  of  service  demanded  of  a  manager,  and 
a  tendency  to  favor  sacrificing  efficiency  for  the  sake  of  so-called 
economy.  Fortunate  indeed  is  the  organization  whose  leaders 
have  sufficient  discernment  and  power  of  persuasion  to  effect  the 


94  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [94 

employment  of  a  manager  whose  capacity  coincides  with  the  re- 
quirements of  the  given  position.  The  experience  of  the  Turlock 
Merchants  and  Growers,  Incorporated,  illustrates  this  point. 
During  their  first  season's  operations,  the  business  was  handled 
by  an  executive  board  of  three  members,  who  really  donated  their 
services  for  the  good  of  the  cause.  The  next  year,  with  a  much 
larger  business  to  handle,  it  was  decided  to  hire  a  manager  to 
devote  his  entire  time  to  the  work.  Then  came  the  question  of 
salary  of  a  manager.  Some  members  thought  that  $1,000  a  year 
would  be  ample;  othei*s  thought  $100  a  month  a  more  appropri- 
ate figure,"  but  the  salary  was  finally  fixed  at  $4,000  a  year,  and 
a  man  secured  whose  business  experience  and  ability  have  con- 
tributed much  to  the  remarkable  progress  of  this  organization. 

Broad  experience  and  demonstrated  ability  on  the  part  of 
those  employed  to  fill  important  positions  have  been  recognized 
by  the  directors  of  the  various  large  co-operative  organizations 
as  essential  to  the  success  of  these  institutions.  Knowledge  of 
men  and  of  marketing  methods  and  trade  conditions  in  general 
have  been  considered  more  important  than  specific  training  in 
the  handling  of  a  particular  commodity,  for  fitting  a  man  to 
manage  the  business  of  a  central  co-operative  selling  organization. 
The  present  manager  of  the  California  Almond  Growers  Ex- 
change was  formerly  sales  manager  of  the  California  Fruit  Ex- 
change, and  previous  to  that  was  connected  with  the  Chicago 
office  of  the  California  Fruit  Growers  Exchange;  the  present 
manager  of  the  California  Fruit  Exchange  was  also  formerly  in 
one  of  the  eastern  sales  offices  of  the  California  Fruit  Growers 
Exchange ;  and  the  sales  manager  of  the  Turlock  Merchants  and 
Growers,  Incorporated,  had  had  many  years  of  experience  in  the 
fruit  trade,  especially  in  the  handling  of  citrus  fruits,  before  he 
•undertook  to  direct  the  sales  of  Turlock  cantaloupes. 

Experience  as  sales  managers  in  the  eastern  fruit  markets  is 
exceptionally  good  training  preparatory  to  the  assumption  of 
duties  in  responsible  positions  in  the  California  offices  of  the 
various  co-operative  organizations.  The  orange  and  lemon  sales 
managers  in  the  Los  Angeles  office  of  the  California  Fruit  Grow- 
ers Exchange  each  spent  several  years  in  the  eastern  offices,  in 

11  Personal  interview  with  W.  H.  Lockwood,  a  director  of  the  Turlock 
Merchants  and  Growers,  Incorporated,  July  19,  1916. 


95]  SOME  ESSENTIAL  DETAILS  95 

direct  contact  with  the  fruit  trade,  before  receiving  their  present 
appointments.  The  eastern  district  sales  managers  of  this  Ex- 
change are  at  the  present  time  training  a  corps  of  assistants  who 
are  becoming  thoroughly  familiar  with  trade  conditions  in  the 
leading  markets,  and  who  are  being  advanced  to  positions  as 
sales  managers  in  smaller  markets  as  their  ability  becomes  dem- 
onstrated and  as  occasions  arise.  Thus  the  California  Fruit 
Growers  Exchange  is  building  up  in  its  sales  department  a  group 
of  trained  men  who  are  in  sympathy  with  co-operative  methods 
of  marketing,  and  as  time  goes  on  will  be  available  for  more 
responsible  positions  either  in  that  organization  or  in  other  co- 
operative enterprises.  The  existence  of  this  ** training  school'* 
will  aid  materially  in  solving  the  problem  of  securing  men  who 
are  competent  to  serve  as  managers  in  co-operative  organizations, 
and  has  an  important  bearing  upon  the  extension  of  the  co-op- 
erative method  of  marketing. 

METHODS  OF  SELLING 

The  details  of  handling,  selling,  and  distributing  the  crop  must 
he  adapted  to  the  nature  and  volume  of  the  product. 

While  association  packing  is  desirable  for  the  sake  of  securing 
uniformity  in  the  product,  it  is  not  applicable  to  the  most  per- 
ishable commodities,  because  of  the  very  nature  of  the  product 
or  because  of  the  delay  that  would  be  involved  in  getting  the 
product  from  the  field  to  the  refrigerator  caij.  The  blackberries 
and  loganberries  of  Sebastopol  intended  for  distance  shipment 
must  necessarily  be  placed  in  the  shipping  boxes  by  the  growers, 
since  their  perishable  nature  precludes  pouring  or  handling  at 
the  warehouse  of  the  shipping  association.  In  the  case  of  canta- 
loupes, association  packing  is  impracticable  in  the  handling  of 
a  large  output,  because  of  the  delay  it  would  entail  in  getting  the 
melons  from  the  field  to  the  car.  Melons  ripen  very  rapidly  in 
hot  weather,  and  their  shipping  quality  is  seriously  impaired  by 
a  few  hours'  exposure  to  high  temperature  after  they  are  picked. 
Their  normal  ripening  season  occurs  when  temperatures  are 
likely  to  be  high.  For  example,  at  the  height  of  the  shipping 
season  in  the  Imperial  Valley  in  1916,  the  official  temperature 
(in  the  shade)  reached  as  high  as  116°  F.  If  an  association 
undertook  to  do  the  packing  for  a  number  of  growers,  there 


96  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [96 

would  be  times  at  the  height  of  the  season  (which  usually  occurs 
during  a  period  of  very  hot  weather)  when  the  melons  would 
come  in  in  such  quantities  that  the  packing-shed  would  become 
so  congested  that  some  of  the  melons  would  not  be  packed  for  a 
number  of  hours  after  they  were  picked.  No  elaborate  equip- 
ment is  required  for  packing  cantaloupes,  and  the  product  can 
be  placed  in  the  refrigerator  cars  in  a  shorter  time  after  picking 
if  each  grower  takes  care  of  his  own  packing,  in  a  temporary 
shed  at  the  edge  of  his  field,  where  the  packing  can  start  almost 
as  soon  as  the  picking,  and  where  the  melons  of  one  grower  are 
not  delayed  by  reason  of  the  presence  of  those  of  another. 

With  the  less  perishable  goods,  the  association  can  do  the 
packing,  and  thus  not  only  be  more  certain  of  securing  uniformity 
in  the  packed  product;  but  in  the  case  of  products  the  handling 
of  which  requires  expensive  equipment,  the  association  can  do 
the  packing  at  considerably  less  expense  than  could  an  individual 
grower.  This  is  especially  true  of  such  products  as  oranges  and 
lemons. 

The  method  of  shipping  will  depend  primarily  upon  the  per- 
ishability of  the  product.  For  example,  the  Sebastopol  berries 
shipped  outside  the  state,  are  precooled  as  soon  as  possible  after 
they  are  delivered  by  the  growers;  and  are  then  loaded  into 
pre-iced  refrigerator  express  cars,  which  go  out  on  passenger 
trains.  By  these  means,  these  extremely  perishable  products  are 
shipped  as  far  east  as  Chicago.  California  cantaloupes  for 
eastern  shipment  are  almost  invariably  loaded  into  pre-iced  cars, 
and  require  frequent  re-icing  en  route.  Oranges  require  no  re- 
frigeration in  cool  weather,  but  must  be  shipped  under  ice  when 
the  weather  becomes  warm.  Apples  require  refrigeration  in 
summer,  and  the  insulation  of  refrigerator  cars  to  protect  them 
from  freezing  in  winter.  Other  deciduous  fresh  fruits  are 
shipped  most  extensively  during  hot  weather,  and  require 
thorough  refrigeration.  All  these  fruits  should  be  moved  on  as 
rapid  a  freight  schedule  as  jyossible,  to  avoid  decay  or  other  de- 
terioration in  transit.  Almonds  and  walnuts  are  not  injuriously 
affected  by  ordinary  extremes  of  heat  or  cold,  and  might  be 
classed  as  non-perishable  products  so  far  as  shipping  is  con- 
cerned; yet  rapid  movement  of  shipments  is  desirable  since  the 
chief  demand  for  these  commodities  in  eastern  markets  occurs 


97]  SOME  ESSENTIAL  DETAILS  97 

within  a  comparatively  short  time  after  the  harvesting  season. 
Raisins,  prunes,  and  dried  peaches,  on  the  other  hand,  can  be 
moved  on  a  slower  schedule,  and  have  even  been  shipped  to  At- 
lantic coast  points  by  ocean  freight. 

The  method  of  selling  and  the  thoroughness  of  distribution 
depend  somewhat  upon  the  nature  of  the  product,  but  more 
emphatically  upon  its  volume.  An  independent  local  association 
handling  a  relatively  small  volume  of  product,  such  as  the  Se- 
bastopol  Apple  Growers'  Union,  can  have  its  product  handled 
through  brokers  located  in  various  markets,  at  less  expense  than 
it  could  maintain  agents  of  its  own;  and  it  does  not  attempt  to 
distribute  its  products  uniformly  over  the  United  States,  but 
selects  those  markets  where  there  is  at  the  time  a  special  demand 
for  its  particular  product.  While  the  Sebastopol  Apple  Growers* 
Union  ships  some  of  its  Gravenstein  apples  (its  principal  prod- 
uct) to  Chicago,  New  York,  and  even  Liverpool,  at  times  it  leaves 
untouched  many  markets  that  are  nearer ;  and  the  relative  pro- 
portion of  the  product  sent  to  a  given  market  varies  from  year 
to  year,  depending  largely  upon  the  volume  of  summer  apples 
available  from  other  sources  tributary  to  the  given  market.  This 
shifting  of  the  relative  importance  of  different  markets  for  their 
product  from  year  to  year,  together  with  the  shortness  of  their 
shipping  season  and  the  relative  smallness  of  their  volume,  makes 
the  handling  of  the  crop  through  established  brokers  the  most 
feasible  plan. 

On  the  other  hand,  a  large  marketing  organization,  like  the 
California  Fruit  Growers  Exchange,  which  ships  oranges  and 
lemons  every  week  during  the  year,  and  the  volume  of  whose 
shipments  (aggregating  nearly  30,000  carloads  last  year)  ne- 
cessitates the  use  of  all  the  available  markets  in  the  United  States 
and  Canada  all  the  time,  has  enough  business  to  warrant  the 
development  of  a  marketing  system  of  its  own,  whereby  it  main- 
tains sales  offices  manned  by  salaried  employees  working  under 
its  own  instructions,  in  all  the  leading  markets.  The  California 
Fruit  Growers  Exchange  has  salaried  representatives  in  77  dif- 
ferent markets,  well  distributed  over  the  country.  It  aims  to 
maintain  an  office  in  every  market  where  its  business  amounts 
to  the  sale  of  100  carloads  or  more  of  fruit  per  year.  In  other 
markets  sufficiently  large  to  handle  oranges  by  the  carload,  the 


98  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [98 

Exchange  is  represented  by  local  brokers,  who  work  in  conjunc- 
tion with  the  Exchange  office  located  nearest  to  them.  In  a  few 
of  the  larger  cities,  especially  near  the  eastern  seaboard,  the 
Exchange  representative  acts  as  receiving  agent,  and  the  fruit 
is  sold  at  auction ;  but  in  most  of  the  markets,  the  representative 
of  the  Exchange  sells  the  fruit  in  carload  lots  directly  to  local 
jobbers. 

The  method  of  handling  shipments  to  bring  about  as  thorough 
a  distribution  of  the  oranges  as  possible,  is  as  follows : 

Every  Friday,  each  representative  in  the  markets  wires  the 
Los  Angeles  office  an  estimate  of  the  number  of  cars  his  market 
can  handle  to  advantage  from  the  shipments  to  be  made  the  fol- 
lowing week,  and  the  manager  of  each  district  exchange  tele- 
phones the  same  office  an  estimate  of  the  number  of  cars  he  plans 
to  ship  during  the  same  period.  With  this  information  at  hand, 
together  with  daily  telegraphic  reports  on  the  condition  of  the 
various  markets  and  the  number  of  cai^  on  track,  and  a  knowl- 
edge of  the  number  of  cars  en  route,  the  Los  Angeles  office  is 
in  a  position  to  give  intelligent  advice  to  the  various  district 
exchange  managers  in  the  distribution  of  the  next  week's 
shipments. 

Continuous  rains  for  several  days  in  the  producing  region 
may  interfere  with  picking  to  such  an  extent  that  the  shipments 
of  a  given  week  may  fall  away  below  the  estimate,  and  zero 
weather  in  the  markets  may  prevent  the  normal  movement  of 
stock ;  also  especially  favorable  weather  at  either  end  of  the  line 
may  result  in  heavier  movement  than  anticipated.  Thus,  the 
actual  amount  of  fruit  handled  in  a  given  week  may  differ  widely 
from  the  original  estimate.  Nevertheless  the  estimate  serves  as 
the  best  available  working  basis. 

As  soon  as  a  carload  of  oranges  packed  by  a  local  association 
is  ready  for  shipment,  the  manager  of  the  association  reports 
that  fact  by  telephone  to  the  manager  of  the  district  exchange  to 
which  the  association  belongs,  giving  a  complete  list  of  the  sizes 
and  grades  in  the  car.  While  each  local  association  has  the  right 
to  determine  where  its  fruit  is  to  be  shipped,  this  authority  is 
usually  delegated  to  the  district  exchange  manager.  In  any 
case  all  the  business  has  to  be  done  through  him,  for  the  Los 
Angeles  office  of  the  California  Fruit  Growers  Exchange  recog- 


99]  SOME  ESSENTIAL  DETAILS  99 

nizes  as  shippei-s  oiily  the  managers  of  the  seventeen  district 
exchanges. 

The  manager  of  a  district  exchange  calls  up  the  Los  Angeles 
office  every  afteraoon  and  reports  what  cars  his  associations 
have  loaded  ready  for  shipment,  specifying  grades,  sizes,  and 
association  pack  in  e^ch  case.  The  market  to  which  each  partic- 
ular car  is  to  be  billed  is  decided  upon  by  the  district  exchange 
manager  (unless  the  local  association  has  demanded  that  its  au- 
thority be  not  delegated)  either  during ^r  after  his  consultation 
with  the  Los  Angeles  office.  In  any  case  the  district  exchange 
manager  reports  the  shipment  to  the  Los  Angeles  office  as  soon  as 
the  car  is  billed  out.  The  bill  of  ladipjg,  together  with  a  size  list 
and  other  data,  is  then  mailed  to  the  representative  of  the  ex- 
change located  in  the  market  to  which  the  car  is  billed.  Since  it 
takes  the  freight  several  days  longer  than  the  mail  to  reach  des- 
tination, the  agent  has  time  to  ''work  on"  a  given  car  some  time 
before  it  arrives.  However,  he  does  not  quote  any  price  on  a 
particular  car  until  the  day  before  it  arrives.  The  second  day 
before  a  given  car  is  due  at  destination,  the  manager  of  the 
district  exchange  that  shipped  the  car  sets  a  price  on  it,  after 
consultation  with  the  Los  Angeles  office.  This  price  is  wired 
by  the  Los  Angeles  office  to  the  agent  in  the  market  and  he 
quotes  that  figure  to  the  prospective  buyer  either  before  or 
after  the  car  has  arrived.  If  the  jobber  agrees  to  take  the  car 
at  the  price  named,  the  deal  is  closed  without  further  delay.  If, 
however,  the  jobber  is  not  willing  to  pay  the  price  asked,  but 
makes  an  offer,  the  agent  is  not  at  liberty  to  accept  this  offer,  but 
must  wire  back  to  the  Los  Angeles  office  for  instructions.  Here 
the  matter  is  discussed  by  telephone  by  the  Los  Angeles  office 
and  the  manager  of  the  district  exchange  who  made  the  ship- 
ment, and  a  reply  to  the  sales  agent  decided  upon,  the  district 
exchange  manager  always  having  the  right  to  render  the  final 
decision,  though  often  acting  largely  upon  the  advice  of  the 
head  of  the  sales  department  in  the  Los  Angeles  office.  The 
offer  may  be  accepted,  or  the  car  may  be  diverted  to  another 
market. 

A  car  of  oranges  is  always  inspected  upon  aiTival.  The  in- 
spection is  made  either  by  the  agent  of  the  Exchange  or  one  of 
his  assistants,  and  includes  opening  and  examining  the  contents 


100  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [100 

of  three  boxes  of  fruit  to  determine  general  appearance  and 
condition,  especially  percentage  of  rot,  if  any.  If  there  is  much 
rot,  or  if  the  three  boxes  do  not  show  fairly  uniform  condition,  it 
is  customary  to  open  several  more  boxes  —  perhaps  ten  in  all. 
In  case  there  is  over  three  per  cent  of  rot,  a  cori^sponding  per- 
centage of  the  price  quoted  by  the  shipper  may  be  deducted  by 
the  agent  from  the  bill  rendered  the  jobber.  That  is,  the  shipper 
guarantees  delivery  with  not  over  three  per  cent  of  rot,  at  the 
price  quoted ;  and  if  a  greater  amount  of  rot  is  found,  the  agent 
does  not  have  to  wire  for  instructions  before  allowing  the 
deduction.^2 

In  the  selling  and  distribution  of  walnuts  and  almonds,  com- 
modities for  which  the  principal  wholesale  demand  is  limited  to 
a  very  short  season,  the  maintenance  of  sales  offices  in  the  various 
markets  would  be  utterly  impracticable;  and  the  growers'  co- 
operative organizations  handling  these  two  products  have  wisely 
elicited  the  services  of  brokers,  who  represent  them  in  the  various 
markets.  The  California  Walnut  Growers  Association  and  the 
California  Almond  Growers  Exchange  employ  essentially  the 
same  methods  in  selling  and  distributing  their  products.  There- 
fore, one  description  will  serve  for  both.  The  manager  of  the 
organization  calls  upon  the  eastern  brokers  and  the  trade  (job- 
bers) once  a  year  to  make  or  renew  arrangements  with  the 
brokers  and  to  assist  in  the  creation  and  maintenance  of  good 
feeling  toward  the  organization,  on  the  part  of  the  jobbers.  All 
sales,  however,  are  made  through  the  brokers.  They  secure  orders 
from  the  various  jobbers  in  their  respective  territories,  and  trans- 
mit these  orders  to  the  California  organization,  several  months 
in  advance  of  the  harvest.  These  orders  are  all  taken  subject  to 
confirmation  after  prices  are  named.  Prices  are  named  by  the 
growers*  co-operative  organization  at  the  beginning  of  the  har- 
vest, and  are  transmitted  by  wire  to  all  who  have  placed  orders. 
By  the  terms  of  the  buyers'  contract,  the  orders  must  be  con- 
firmed or  rejected  within  36  hours  after  notice  of  price  is 
received,  though  the  buyer  has  the  privilege  of  confirming  his 
order  for  only  a  part  of  the  quantity  originally  specified,  if  he 

12  Personal  interview  with  D.  C.  King,  Manager,  Orange  Sales  Depart- 
ment, California  Fruit  Growers  Exchange. 


101]  SOME  ESSENTIAL  DETAILS  101 

SO  desires.  With  the  approval  of  the  seller,  he  may  also  increase 
the  amount  of  the  order,  at  the  price  named. 

When  the  walnuts  or  almonds  are  shipped,  they  are  sent  in 
straight  cars  to  the  large  markets,  and  in  *'pool  cars"  to  the 
smaller  markets.  A  pool  car  is  one  containing  shipments  for 
more  than  one  purchaser.  By  shipping  pool  cars  it  is  possible 
to  secure  carload  freight  rates  directly  to  any  market  where 
orders  aggregating  a  carload  can  be  secured,  even  though  several 
dealers  are  represented ;  and  in  some  cases  shipments  for  nearby 
towns  are  included  in  a  pool  car  shipped  to  a  central  point.  The 
broker  looks  after  the  distribution  of  the  contents  of  a  pool  car 
to  the  various  purchasers.  This  method  of  distribution  enables 
the  dealer  in  a  small  market  to  secure  his  supplies  directly  from 
the  growers'  organization  at  practically  the  same  price  as  dealers 
in  the  large  markets,  for  the  price  f .  o.  b.  California  is  the  same 
to  everybody,  and  the  transportation  charges  are  the  same  to 
all  markets,  except  that  there  would  be  a  slight  additional  charge 
for  local  freight  or  other  transportation  on  small  lots  reshipped 
to  towns  other  than  destinations  of  pool  cars,  making  the  cost 
to  the  dealer  slightly  more  in  such  cases. 

These  illustrations  serve  to  show  that  California  growers'  co- 
operative marketing  organizations  have  recognized  the  impor- 
tance of  employing  methods  of  sale  and  distribution  adapted  to 
the  nature  and  volume  of  their  respective  products. 

LOYALTY  OP  MEMBERS  AND  EMPLOYEES 

Loyalty  of  the  individual  members  and  mutual  confidence 
among  all  factors  in  the  organization  are  absolutely  essential  to 
the  permanent  success  of  any  co-operative  enterprise. 

The  idea  of  loyalty  is  inherent  in  the  very  idea  of  co-operation. 
When  a  group  of  men  mutually  agree  to  bind  themselves  to- 
gether for  the  purpose  of  accomplishing  a  given  object,  each 
member  of  the  group  has  a  right  to  proceed  upon  the  assumption 
that  every  other  member  intends  to  adhere  to  the  agreement ;  and 
unless  such  an  assumption  is  approximately  in  accord  with  the 
facts,  disintegration  of  the  group,  before  the  object  is  accom- 
plished, is  almost  inevitable.  Furthermore,  a  co-operative  en- 
terprise is  based  upon  the  assumption  that  the  various  individuals 
entering  upon  the  agreement  not  only  intend  to  fulfill  their  ob- 


102  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [102 

ligations,  but  that  they  actually  will;  and  the  degree  to  which 
this  latter  assumption  is  in  accord  with  the  facts  will  furnish  a 
fairly  reliable  indication  of  the  probable  ultimate  success  or 
failure  of  the  organization. 

Early  in  the  co-operative  movement  among  the  citrus  fruit 
growers,  it  was  customary  to  make  all  agreements  for  only  one 
year  at  a  time.  Tliis  gave  the  enemies  of  the  co-operative  market- 
ing system  a  chance  to  persuade  members  to  withdraw  from  the 
organization  at  the  end  of  any  given  year,  without  breaking 
their  technical  obligations ;  and  necessitated  much  reorganization 
work  each  year.  Until  the  rank  and  file  of  the  growers  came  to 
look  upon  co-operative  marketing  as  a  permanent  arrangement 
rather  than  a  temporary  expedient,  the  very  life  of  the  organiza- 
tion was  continually  threatened;  and  but  for  the  enthusiastic 
loyalty  of  the  leaders  and  their  consistent  efforts  to  counteract 
the  effect  of  outside  influences,  deflections  from  membership 
would  doubtless  have  been  much  more  numerous  than  they  were. 

Merely  remaining  in  an  organization  from  year  to  year,  and 
fulfilling  all  technical  contracts,  is  not  the  full  measure  of  true 
loyalty.  Firm  belief  in  the  soundness  of  the  principles  of  the 
organization  and  its  methods  of  operation,  and  willingness  to 
defend  that  belief  in  the  face  of  opposition,  are  also  essential. 
Lack  of  intimate  knowledge  of  the  detailed  workings  of  the  or- 
ganization, on  the  part  of  the  individual  members,  has  sometimes 
stood  in  the  way  of  their  being  as  loyal  as  they  otherwise  would 
have  been.  The  entire  membership  of  a  co-operative  marketing 
organization  should  therefore  be  kept  in  sympathetic  touch  with 
the  purposes,  policies,  and  accomplishments  of  the  organization 
as  a  whole.  This  can  be  done  in  part  by  printed  publications 
or  mimeographed  bulletins  sent  out  from  the  central  office  of 
the  organization ;  but  such  expedients  are  veiy  deficient  in  effec- 
tiveness as  compared  with  the  human  voice  in  personal  confer- 
ence. Frequency  of  i)ersonal  contact  of  member  with  member,  of 
member  with  manager,  of  local  manager  with  officials  of  the 
central  office,  and  of  officials  of  the  central  office  with  local  asso- 
ciations, makes  possible  the  clearing  up  of  any  uncertainties  or 
misunderstandings  and  leads  to  a  better  knowledge  and  more 
enthusiastic  support  of  the  organization. 

An  industiy  in  which  the  product  is  of  such  a  nature  that  the 


103]  SOME  ESSENTIAL  DETAILS  103 

growers  are  likely  to  come  in  personal  contact  with  the  local 
managers  at  frequent  intervals  through  a  large  part  of  the  year 
has  some  advantages  over  other  industries  by  reason  of  this  very 
fact ;  for  it  serves  to  keep  the  individual  grower  in  closer  touch 
with  the  workings  of  his  organization.  This  is  especially  true  if 
the  local  manager  also  attends  frequent  meetings  of  the  central 
organization  and  thus  keeps  fully  advised  on  all  matters  pertain- 
ing to  the  welfare  of  the  organization.  The  citrus  industry  serves 
as  an  illustration.  In  many  districts,  the  shipping  season  is  long ; 
a  very  large  number  of  the  local  associations  are  within  a  short 
distance  from  Los  Angeles  where  the  central  offices  are  located; 
the  central  organization  holds  meetings  once  a  week  throughout 
the  year;  local  managers  and  individual  members  are  welcome 
at  these  meetings  and  large  numbers  avail  themselves  of  this 
opportunity  to  keep  in  direct  touch  with  the  affairs  of  the  or- 
ganization as  a  whole.  In  addition  to  this,  the  members  of  the 
field  department  spend  much  time  in  visiting  local  managers  at 
their  packing-houses,  not  only  advising  them  in  reference  to 
technical  points  on  grading  and  packing,  but  also  keeping  them 
intelligently  informed  on  all  phases  of  the  organization's  work. 
The  annual  meeting  of  each  local  association  is  also  made  a  special 
occasion  for  instructing  the  members  in  the  broader  phases  of 
the  organization's  activities  and  accomplishments.  A  represen- 
tative of  the  field  department  of  the  central  exchange,  and  the 
manager  of  the  district  exchange,  are  usually  present  at  such 
meetings.  The  importance  of  these  meetings  is  emphasized  by 
P.  J.  Dreher.^^  Speaking  of  the  "development  of  the  co-oper- 
ative spirit,"  he  says:  ''It  was  largely  brought  about  through 
a  system  of  all-day  annual  stockholders'  meetings,  first  adopted 
by  the  Indian  Hill  Citrus  Association  in  1897.  Lunch  is  served 
at  noon  by  the  Association,  to  which  the  stockholders  and  their 
wives  and  families  are  invited.  They  in  turn  invite  such  of  their 
neighbor  citrus  fruit  growers  as  they  believe  will  take  an  interest 
in  the  matter. 

"The  growers  are  urged  to  come  and  spend  at  least  one  day 
to  the  details  of  marketing  a  crop  which  it  took  them  a  whole 
year  to  produce.     The  meetings  are  called  to  order  early  and 

isDreher,  P.  J.,  ''Early  History  of  Cooperative  Marketing  of  Oitrus 
Fruit. '^     California  Citrograph,  Oct.,  1916,  pp.  2,  3,  17,  18. 


104  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [104 

continued  through  the  day,  the  forenoon  being  taken  up  with  the 
reports  of  the  association,  election  of  directors,  followed  by  the 
District  Exchange  manager's  report,  while  the  afternoon  is  taken 
up  with  the  discussion  of  these  reports  and  such  other  matters 
as  are  of  mutual  interest  to  the  industry.     .     .     . 

' '  At  these  meetings  full  opportunity  is  given  and  the  members 
are  urged  to  ask  questions  and  bring  out  any  and  all  points  de- 
sired. The  District  Exchange  manager  reports  fully  on  all  mat- 
ters pertaining  to  the  Selling  Department  and  answers  fully  all 
questions  pertaining  thereto. 

*'It  is  our  aim  to  have  the  growers  fully  understand  the  con- 
dition of  the  industry  in  its  early  days,  the  struggles  of  the 
growers  in  bringing  into  working  order  the  present  Exchange 
system  .  .  .  and  the  method  by  which  their  fruit  is  market- 
ed, as  we  believe  with  a  clear  understanding  of  our  system  on 
their  part  they  will  extend  to  the  Exchange  the  confidence  and 
support  which  is  necessary  for  the  success  of  any  co-operative 
organization. ' '  ^* 

Not  only  does  the  California  Fruit  Growers  Exchange  plan  to 
keep  its  8,000  members  in  i)ersonal  touch  with  the  activities  of 
the  organization  as  a  whole,  but  so  manages  its  affairs  that  its 
representatives  in  the  eastern  markets  do  not  feel  nor  act  like 
isolated  individuals,  but  realize  their  function  as  parts  of  one 
great  organization,  all  factors  of  which  are  working  together 
harmoniously  with  one  object  in  view  —  the  best  possible  distri- 
bution of  the  California  citrus  fruit  crop.  Each  of  the  77  dis- 
trict sales  managers  receives  instructions  by  wire  regarding  every 
car  of  fruit  shipped  to  his  territory,  and  reports  by  wire  daily 
to  the  general  sales  manager  in  Los  Angeles,  and  is  also  in 
almost  daily  communication  by  telephone  with  his  division  sales 
manager,  who  is  located  in  the  most  important  market  in  the 
given  division.  The  division  sales  managers,  of  whom  there  are 
seven,  are  men  of  long  experience  in  the  fruit  trade,  and,  being 
located  in  the  larger  markets,  are  in  closer  touch  with  general 
trade  conditions  than  are  the  district  managers  at  the  less  im- 
portant points.    They  not  only  advise  with  the  district  managers 

14  Mr.  Dreher  is  here  speaking  from  the  standpoint  of  an  oflScial  in  the 
central  organization.  He  is  vice-president  of  the  California  Fruit  Growers 
Exchange,  and  manager  of  the  San  Antonio  [District]  Fruit  Exchange 
having  held  the  latter  position  continuously  for  twenty-one  years. 


105]  SOME  ESSENTIAL  DETAILS  105 

in  their  respective  divisions,  but  are  in  position  to  make  personal 
visits  to  any  of  the  markets  as  occasion  may  demand.  In  addition 
to  this  general  supervision  accorded  each  representative  during 
the  season,  the  general  manager  of  the  Exchange  and  the  general 
sales  manager  visit  each  district  sales  manager  at  least  once  each 
year  and  talk  over  with  him  his  particular  problems  as  well  as 
the  general  plans  for  the  season 's  selling  campaign.  The  division 
sales  manager  participates  in  these  conferences  with  the  district 
managers  with  his  division.  At  times,  also,  as  many  as  possible 
of  the  eastern  representatives  get  together  for  a  general  confer- 
ence with  the  heads  of  the  departments  of  the  central  organiza- 
tion. These  arrangements  are  conducive  to  harmony  within  the 
sales  department  and  also  serve  to  bind  that  department  by 
personal  ties  to  the  other  factors  in  the  organization. 

Thus  in  the  marketing  of  California  citrus  fruits  there  is  a 
complete  chain  of  personal  contact,  under  one  organization,  from 
the  grower  who  produces  the  fruit,  to  the  jobber  who  buys  it  in 
carload  lots  on  the  eastern  market.  The  grower  delivers  his 
fruit  at  the  packing-house  of  his  local  association,  where  he  talks 
personally  with  the  association  manager ;  the  local  manager  talks 
personally  or  by  telephone  with  the  district  exchange  manager 
at  least  once  a  day  during  the  shipping  season,  and  also  attends 
the  weekly  meetings  of  the  central  exchange  as  often  as  he  can ; 
the  district  exchange  manager  talks  by  telephone  with  the  gen- 
eral sales  manager  or  one  of  his  assistants  regarding  every  car- 
load of  fruit  shipped  from  his  district,  and  also  attends  the 
meetings  of  the  central  exchange,  where  the  sales  manager  re- 
ports on  the  chief  activities  in  the  various  markets  and  on  general 
market  conditions,  and  where  personal  conferences  are  held 
between  the  sales  manager  and  the  district  exchange  managers; 
the  sales  manager,  who  has  previously  had  personal  conferences 
with  all  the  eastern  representatives,  wires  the  instructions  from 
the  district  exchange  manager  regarding  each  car;  the  eastern 
representative  (district  sales  manager)  talks  personally  with  the 
jobber  who  buys  the  fruit. 

Without  this  personal  contact,  and  the  mutual  confidence 
among  all  the  factors  in  the  organization,  which  has  been  fos- 
tered by  it,  it  is  exceedingly  doubtful  whether  the  California 
Fruit  Growers  Exchange  could  ever  have  attained  to  its  present 
efficiency  in  the  marketing  of  California  citrus  fruits. 


CHAPTER  VI 
OTHER    CALIFORNIA    MARKETING    ORGANIZATIONS 

The  general  principles  of  co-operative  marketing  as  exempli- 
fied by  the  activities  and  experiences  of  California  growers' 
organizations  have  now  been  considered.  As  stated  in  the  intro- 
duction (p.  11)  only  about  20  per  cent  of  the  deciduous  fresli 
fruit  shipped  from  California  is  handled  by  the  growers'  or- 
ganization representing  that  industry.  Of  the  vegetable  ship- 
ments, a  still  smaller  percentage  is  distributed  by  growers' 
organizations.  California  shipments  of  deciduous  fresh  fruits 
and  of  vegetables  are  handled  largely  by  organizations  of  com- 
mercial shippei*s.  The  most  prominent  of  these  organizations 
are  the  California  Fruit  Distributors  and  the  California  Vege- 
table Union.  It  will  be  of  interest  to  consider  briefly  the  methods 
of  operation  employed  by  these  organizations,  and  to  compare 
the  relative  advantages  of  marketing  through  such  organizations 
and  through  co-operative  organizations  of  growers. 

The  California  Fruit  Distributors  is  the  marketing  agency  for 
fourteen  commercial  fruit  companies  and  handles  from  65  to 
70  per  cent  of  the  California  deciduous  fresh  fruits  shipped  to 
eastern  markets.^  It  is  represented  by  salaried  agents  in  the 
leading  markets  and  has  its  business  handled  through  brokers 
in  the  smaller  markets.  These  representatives  vdre  daily  market 
reports  and  reports  of  actual  sales  to  the  main  office  of  the  Dis- 
tributors, in  Sacramento;  and  this  office  furnishes  mimeograph 
copies  of  these  reports  to  the  members  (the  commercial  shipping 
firms)  before  noon  each  day.  This  is  a  simple  matter,  for  nearly 
all  the  firms  have  offices  in  the  same  building  (the  California 
Fruit  Building).  All  shipments  made  by  the  Distributors  are 
reported  by  wire  to  the  Omaha  office,  with  car  numbers  and  con- 

1  Personal  interview  with  Charles  E.  Virden,  General  Manager,  California 
Fruit  Distributors,  July  20,  191(). 

106 


107]  OTHER  CALIFORNIA  MARKETING  ORGANIZATIONS  107 

tents;  and  the  Omaha  office  gets  out  mimeograph  sheets  shomng 
the  shipments  of  each  day  and  mails  them  to  all  the  eastern 
representatives.  These  representatives  can  then  wire  requests 
for  diversion  of  particular  cars  to  their  respective  markets,  and 
sell  part  of  the  cars  while  still  rolling  —  or  at  least  ''work  on" 
them. 

The  shipping  firms  which  are  served  by  the  California  Fruit 
Distributors  get  their  fruit  from  the  growers  in  any  way  they 
can,  and  may  change  their  methods  from  year  to  year,  or  employ 
different  methods  the  same  year  to  suit  the  fancy  of  the  different 
growers.  Sometimes  the  shipper  buys  the  fruit  outright  from 
the  grower  at  a  fixed  price.  Another  method  is  for  the  shipper 
to  guarantee  the  grower  a  definite,  conservative  price ;  and  then, 
if  the  fruit  nets  a  larger  amount  after  marketing  expenses  are 
covered,  to  divide  the  profit  evenly  with  the  grower,  each  taking 
50  per  cent.  Still  another  method  is  for  the  shipper  to  handle 
the  fruit  on  a  straight  commission  basis,  the  usual  rate  being  7 
per  cent  on  grass  sales.  Since  each  shipping  firm  pays  the  * '  Dis- 
tributors" 4  per  cent  on  sales  for  its  services  in  connection  with 
all  shipments,  the  direct  revenue  to  the  shipper  on  commission 
business  is  only  3  per  cent.^ 

The  growers  do  most  of  the  packing  themselves,  but  it  is 
customary  for  the  shipping  firm  to  have  a  representative  call  at 
each  packing-house  once  or  twice  a  day. 

The  California  Vegetable  Union  is  a  close  corporation  owned 
by  five  or  six  men.  It  handles  California  vegetables  on  a  com- 
mission or  brokerage  basis  or  buys  them  outright;  and  its  ship- 
ments amount  to  40,000  to  50,000  carloads  per  year,  or  about  75 
per  cent  of  the  total  California  output.' 

The  California  Vegetable  Union  has  established  packing-houses 
in  fifty  or  sixty  places  scattered  over  the  state.  This  concern 
aims  to  locate  where  the  natural  conditions  are  most  favorable 
to  the  production  of  an  especially  fine  grade  of  any  given  product 
in  their  line.    The  usual  method  is  to  go  into  a  locality  and  or- 

2  Personal  interview  with  James  H.  Hayes,  Traffic  Manager,  Pacific  Fruit 
Exchange  (which  is  a  member  of  the  California  Fruit  Distributors),  July 
20,  1916. 

3  Personal  interview  with  H.  8.  Hazeltine,  Secretary,  California  Vegetable 
Union,  May  8,  1916. 


108  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [108 

ganize  the  growers  into  an  association;  then  contract  to  handle 
the  product  of  the  association.  After  some  preliminary  work, 
a  meeting  of  the  growers  is  called,  and  the  plan  for  handling  the 
product  is  presented.  Then  the  growers  organize,  elect  directors 
and  officers,  usually  including  a  manager.  The  Union  then  makes 
a  contract  with  the  directors ;  but  since  the  association  is  usually 
not  incorporated,  the  Union  also  draws  up  a  contract  which  all 
the  growers  sign  individually.  Thus  the  Union  has  a  contract 
with  both  the  association  and  the  individuals  composing  it.  In 
most  localities,  this  process  of  organizing  the  growers  by  the 
Union  has  to  be  repeated  every  year.  For  example,  the  San 
Gabriel  Valley  Potato  Growers^  Association  has  been  organized 
by  the  Union  every  year  for  10  or  12  years. 

The  Union  handles  potatoes  for  the  growers*  account  at  10 
cents  per  sack  brokerage,  or  on  a  commission  basis,  and  gives  the 
growers  the  choice  between  the  two  methods  at  the  time  the 
contract  is  being  drawn.  In  addition  to  the  commission  or  bro- 
kerage, one  cent  per  sack  is  retained  with  which  the  overhead 
expenses  of  the  association  are  paid. 

The  Union  ordinarily  buys  tomatoes  outright.  It  contracts 
to  handle  the  crop  of  an  association  and  to  pay  the  ''market 
price.*'  Said  market  price  is  determined  as  follows:  Every 
Friday  the  representative  of  the  Union  and  the  manager  of  the 
association  have  a  conference,  and  agree  upon  the  price  to  be 
paid  the  following  week,  taking  into  consideration  the  market 
conditions,  etc.  The  tomatoes  are  delivered  in  field  boxes  at  the 
Union's  packing-house  and  weighed  in.  After  the  tomatoes  are 
graded,  the  culls  are  weighed  back;  and  the  Union  pays  only 
for  the  good  tomatoes. 

The  Union  usually  buys  the  asparagus  it  handles.  The  aspara- 
gus is  delivered  at  the  packing-house  in  lug  boxes,  where  it  is 
weighed.  After  bunching,  the  stalks  are  cut  to  9  inches  in 
length.  The  butts  and  culls  are  all  weighed  back,  and  the  Union 
pays  only  for  the  asparagus  that  is  packed  for  shipment.* 

While  it  is  quite  common  for  the  Union  to  reorganize  the 
growers  of  a  given  locality  each  year,  sometimes  a  more  perma- 
nent local  organization  is  formed  and  a  contract  entered  into 
for  a  term  of  years.    For  example,  at  one  time  the  Union  had  a 

*  Interview  with  H.  S.  Hazeltine. 


109]  OTHER  CALIFORNIA  MARKETING  ORGANIZATIONS  109 

five-year  contract  with  a  local  association  of  celery  growers  near 
Sant^  Ana,  in  Orange  County. 

It  is  the  practice  of  the  Union  to  do  the  grading  and  packing 
of  the  products  it  handles.  Even  in  the  handling  of  potatoes, 
which  are  sacked  in  the  field,  men  representing  the  Union  do  the 
sacking.  Such  methods  result  in  greater  uniformity  in  the  prod- 
uct than  is  usually  possible  where  individual  growers  do  their 
own  grading  and  packing,  even  under  general  supervision  of  the 
shippers'  representatives;  and  in  this  respect  the  methods  of 
the  California  Vegetable  Union  would  seem  to  be  superior  to 
those  employed  by  the  shipping  firms  which  compose  the  Cali- 
fornia Fruit  Distributors. 

Three  years  ago  the  California  Fruit  Distributors  and  the 
California  Vegetable  Union,  together  with  various  other  corpor- 
ations handling  horticultural  products,  formed  the  General  Sales 
Agency  of  America.*  The  California  Fruit  Distributors  had 
previously  started  an  eastern  agency,  but  the  volume  of  their 
product  was  not  sufficient  to  give  the  best  results,  and,  further- 
more, the  movement  of  their  product  was  confined  to  certain 
months  of  the  year.  In  the  building  up  of  the  General  Sales 
Agency  from  the  eastern  agency  of  the  Distributors  as  a  nucleus, 
corporations  came  in  which  represented  products  the  heavy 
movements  of  which  came  at  different  times  of  the  year.  This 
made  possible  the  continuous  employment  of  salaried  represen- 
tatives in  the  various  markets,  on  a  plan  similar  to  that  instituted 
years  before  by  the  California  Fruit  Growers  Exchange  for 
citrus  fruits.  In  fact,  the  man  hired  to  start  the  eastern  agency 
of  the  Distributors  had  formerly  been  General  Eastern  Agent 
of  the  Exchange.^  The  General  Sales  Agency  of  America  now 
maintains  agents  in  all  the  leading  carlot  markets  of  the  country, 
who  look  after  the  sales  of  the  shipments  made  by  the  various 
corporations  which  are  members  of  the  Agency.  The  Agency 
is  paid  a  brokerage  for  each  car  of  produce  it  sells,  and  if  any 
money  is  made,  it  is  expected  that  it  will  be  distributed  among 
the  various  corporations  (members)  in  proportion  to  the  amount 
of  business  done  for  each.    The  General  Sales  Agency  is  thus  a 

R  Personal  interview  with  H.  S.  Hazeltine,  May  3,  1916. 
6  Personal  interview  with  E.  G.  Dezell,  Assistant  General  Manager,  Cal- 
ifornia Fruit  Growers  Exchange,  May  4,  1916. 


110  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [110 

co-operative  organization  of  commercial  corporations  for  their 
mutual  benefit. 

COMPARISON     OF     COMMERCIAL     MARKETING     ORGANIZATIONS     WITH 
growers'  CO-OPERATIVE  ORGANIZATIONS 

A  growers*  co-operative  marketing  organization  has  certain 
advantages,  from  the  standpoint  of  the  grower,  over  commercial 
organizations  like  the  California  Fruit  Distributors  and  the  Cal- 
ifornia Vegetable  Union.  The  principal  advantages  are  that  any 
savings  in  the  cost  of  marketing  due  to  the  large-scale  operations, 
skill  in  management,  or  any  other  cause,  and  any  increase  in 
price  due  to  superiority  or  standardization  of  the  product,  ac- 
crue to  the  benefit  of  the  growers  rather  than  the  dealers.  On  the 
other  hand,  the  commercial  organizations  quite  commonly  have 
one  feature  that  is  usually  lacking  in  a  strictly  co-operative  organ- 
ization of  growers,  and  which  appeals  with  great  force  to  growers 
whose  capital  is  limited.  This  is  the  custom  of  paying  the  gi-ow- 
ers  in  cash  upon  delivery  of  the  product  at  the  packing-house  or 
car,  or  even  advancing  money  during  the  season,  while  the  crop 
is  being  grown.  This  latter  method  is  of  fully  as  much  advantage 
to  the  dealer  as  to  the  grower,  since  it  insures  him  absolute  con- 
trol of  the  crop.  The  delay  in  securing  returns  thix)ugh  a  co-op- 
erative organization,  and  the  need  of  money  at  harvest  time,  or 
even  before,  have  kept  many  growers  out  of  co-operative  organ- 
izations. Some  organizations  are  trying  to  meet  this  situation 
either  by  incorporating  with  sufficient  paid-up  capital  stock  to 
enable  them  to  pay  the  grower  a  large  percentage  of  his  pro- 
ceeds upon  delivery  of  his  product ;  accumulating  a  surplus  fund 
from  savings  in  the  costs  of  marketing,  to  be  used  in  financing 
the  growers  who  need  help;  arranging  directly  for  loans  at  the 
local  banks  to  be  used  in  paying  the  growers  a  large  percentage 
of  the  value  of  their  products  upon  delivery ;  or  making  arrange- 
ments whereby  the  growers  are  enabled  to  make  personal  loans 
at  the  local  banks,  on  the  strength  of  their  crop  contracts  with 
the  organization. 

Without  some  such  arrangement  as  this  there  will  always 
be  growers  who  will  be  compelled  by  force  of  circumstances 
to  continue  to  have  their  products  handled  by  commercial 
dealers,  no  matter  how  fully  in  sympathy  with  the  principles 


Ill]  OTHER  CALIFORNIA  MARKETING  ORGANIZATIONS  111 

of  co-operative  marketing  they  may  be,  nor  how  much  they  are 
in  need  of  the  additional  saving  in  marketing  cost  that  would 
accrue  to  their  benefit  if  they  were  affiliated  with  a  successful  co- 
operative marketing  organization.  Sometimes  those  most  in  need 
of  the  benefits  of  co-operation  are  least  able  to  avail  themselves  of 
them.  Unless  co-operative  organizations  are  able  to  afford  as 
immediate  relief  in  financial  stress  as  are  commercial  dealers, 
even  though  the  toll  exacted  by  the  latter  may  be  enormous,  the 
growers  most  in  need  of  assistance  must  continue  to  turn  for  re- 
lief not  to  their  fellow  growers,  but  to  the  independent  buyers 
or  commercial  corporations.  In  some  localities,  the  most  serious 
practical  defect  in  the  co-operative  organizations  is  their  failure 
to  provide  for  the  financial  needs  of  their  numbers  at,  or  prior 
to,  the  harvesting  of  their  crops.  The  ideal  plan  for  overcoming 
such  a  situation  is  the  gradual  accumulation  of  a  surplus  fund 
that  will  be  available  at  the  beginning  of  each  harvest  season  for 
making  such  advances  as  the  various  growers  may  require.  Of 
course,  this  method  would  be  possible  only  after  an  organization 
had  become  established,  and  had  been  operating  a  sufficient 
length  of  time  to  have  accumulated  a  surplus  or  reserve  fund. 
A  new  organization,  if  it  wished  to  make  cash  advances,  would 
be  obliged  to  elicit  the  co-operation  of  its  local  bank ;  and  as  has 
previously  been  stated,  unless  a  local  co-operative  association 
of  growers  has  the  moral  and  financial  support  of  the  bank  in 
the  locality,  its  chances  of  success  are  greatly  impaired.  It  is 
not  ordinarily  feasible  to  secure  from  the  growers  themselves, 
on  any  equitable  basis,  sufficient  paid-up  capital,  at  the  beginning 
of  the  organization,  to  pay  for  any  considerable  portion  of  the 
products  as  delivered;  so  that,  even  with  a  fairly  large  capital 
stock,  if  the  policy  of  payment  on  delivery  is  adopted,  resort  to 
the  banks  for  loans  must  be  made. 

In  addition  to  securing  for  the  growers  the  benefits  derived 
from  marketing  their  own  products,  other  advantages  of  grow- 
ers' co-operative  organizations  over  commercial  organizations 
for  the  handling  of  horticultural  products  are  the  ability  and 
disposition  to  purchase  orchard  and  other  supplies  in  large  quan- 
tities and  furnish  them  to  the  growers  at  cost;  and  the  mutual 
exchange  of  information  regarding  improved  methods  of  culture, 


112  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [112 

grading,  packing  or  any  other  matter  that  will  benefit  the  in- 
dustry as  a  whole,  from  the  standpoint  of  the  grower. 

AN  EXAMPLE  OF  GOVERNMENT  AID  IN  DISTRIBUTION 

The  past  two  seasons  the  Office  of  Markets  and  Rural  Organ- 
ization of  the  United  States  Department  of  Agriculture  has 
assisted  in  the  distribution  of  cantaloupes  from  the  Imperial 
Valley  to  the  extent  of  maintaining  a  bureau  of  information  at 
Brawley  (the  chief  shipping  point)  during  the  shipping  season 
and  encouraging  the  various  shipping  firms  to  make  intelligent 
use  of  the  information  furnished,  in  determining  the  destination 
of  their  respective  shipments.  The  cantaloupe  crop  of  the  Im- 
perial Valley  is  marketed  almost  entirely  through  some  sixteen 
or  eighteen  general  distributors,  each  of  whom  has  direct  con- 
tracts with  a  number  of  individual  growers  ^  (mostly  Japanese), 
to  whom  they  make  advances  up  to  a  specified  maximum,  as  the 
season  progresses. 

In  1914  all  previous  organizations  of  cantaloupe  growers  or 
dealers  were  inoperative;  and  the  season  was  a  disastrous  one 
because  of  a  lack  of  intelligent  distribution  of  the  crop.  In 
1915,  the  Office  of  Markets  and  Rural  Organization  detailed  a 
man  to  the  Imperial  Valley  to  render  such  assistance  as  might 
be  possible.  He  appointed  a  committee  of  five  distributors,®  who 
made  a  list  of  all  the  carlot  markets  for  cantaloupes,  with  the 
estimated  capacity  of  each.  This  list  was  used  as  a  basis  of 
distribution  throughout  the  season.  Complete  records  were  kept 
regarding  quantities  and  prices  in  the  various  markets,  and  a 
more  accurate  schedule  of  market  capacities  was  made  for  use 
in  1916,  when  the  same  general  method  of  distribution,  with  the 
aid  of  information  furnished  by  the  government,  was  employed. 
The  method  was  essentially  as  follows:  Wires  were  received  by 
the  government  man,  from  each  market  every  morning,  giving 
the  quantity  of  cantaloupes  in  the  market  and  the  prices  ruling. 
These  were  tabulated  and  a  copy  sent  to  each  distributor.    Be- 

T  Exceptions  to  this  general  method  are  that  Will  Fawcett  and  Arakelian 
Bros.,  who  themselves  are  general  distributors,  grow  large  acreages  on  their 
own  accounts. 

8  Personal  interview  with  B.  F.  Coons  (May  4,  1916),  who  was  a  member 
of  this  committee. 


113]  OTHER  CALIFORNIA   MARKETING  ORGANIZATIONS  113 

fore  noon  each  day,  each  distributor  reported  to  the  office  of  the 
government  representative  the  number  of  cars  he  expected  to 
ship  that  day  and  the  market  in  which  he  would  like  to  place 
each  car.  These  reports  were  tabulated  so  that  the  total  number 
of  cars  designed  for  each  market  could  be  ascertained.  A  meet- 
ing of  the  distributors  was  held  at  two  o'clock  each  day,  and  the 
estimated  number  of  cars  designed  for  each  market  was  an- 
nounced. If  the  relative  proportions  of  the  proposed  shipments 
to  the  different  markets  did  not  correspond  fairly  well  with  the 
estimated  relative  capacities  of  the  markets,  adjustments  were 
made  at  this  meeting,  voluntarily,  by  the  various  distributors, 
in  order  to  effect  a  distribution  mor^  nearly  in  accord  with  the 
relative  consumptive  capacities  of  the  various  markets.^ 

The  results  of  this  method  of  distribution  for  the  two  seasons 
it  has  been  in  operation  have  been  very  satisfactory.  However, 
much  of  the  success  of  the  method  has  been  due  to  the  tact,  re- 
sourcefulness and  personality  of  the  government  representative 
in  charge  of  the  office,  and  his  assistants,  in  securing  and  main- 
taining the  mutual  co-operation  of  the  distributors,  without  the 
existence  of  any  fonnal  organization;  for  there  is  no  written 
agreement  whatever,  and  no  verbal  agreement  among  the  ship- 
pers to  do  anything  except  to  state  where  they  would  like  to 
ship  each  car  of  cantaloupes,  and  to  announce  any  changes  they 
may  make  after  learning  the  total  number  of  cars  designed  for 
each  market.^''  The  continuance  of  the  method  depends  primar- 
ily upon  the  personality  of  the  men  whom  the  government  may 
detail  to  the  Imperial  Valley  each  season;  for  the  government 
neither  claims  nor  exercises  any  authority  in  the  distribution  of 
the  cantaloupe  crop,  and  the  acts  of  each  individual  distributor 
are  purely  voluntary.  Under  such  circumstances,  the  harmo- 
nious co-operation  of  the  competing  firms  can  be  maintained  only 
through  the  unauthoritative  influence  of  the  government's 
representatives. 

9  Personal  interviews  with  O.  W.  Sehleussner,  of  the  Office  of  Markets 
and  Rural  Organization;  and  attendance  at  meetings  of  the  distributors, 
June  19,  20  and  21,  1916. 

10  Since  the  above  observations  were  made,  United  States  Department  of 
Agriculture  Bulletin  No.  401  has  been  issued,  describing  the  method  and 
results  for  the  season  of  1915. 


CHAPTER  VII 

RELATION  OF  GROWERS'  CO-OPERATIVE  MARKETING 

ORGANIZATIONS  TO  CONTROL  OF  PRODUCTION, 

DISTRIBUTION,  AND  PRICES 

The  question  sometimes  arises  as  to  whether  or  not  growers' 
co-operative  marketing  organizations,  as  at  present  organized, 
possess  the  power  to  control  the  production,  distribution,  and 
prices  of  the  respective  commodities  they  handle;  and  if  they 
have  that  power,  whether  they  should  have  the  right,  under  the 
law  and  in  human  justice,  to  exercise  it.  This  question  will  now 
be  considered  in  its  threefold  aspect. 

First,  should  a  growers'  co-operative  marketing  organization 
have  the  right  to  control  production;  that  is,  to  determine  or 
limit  the  acreage  of  the  given  crop  which  each  or  any  member 
of  the  organization  shaU  be  allowed  to  plant?  None  of  the 
growers'  co-operative  organizations  operating  in  the  state  of 
California  at  the  present  time,  so  far  as  known  to  the  writer, 
have  any  provision  for  limiting  acreage  or  assume  to  exercise 
any  contix)l  over  the  amount  of  land  which  shall  be  planted  to 
a  given  crop  by  its  respective  members.  The  success  of  the 
various  organizations  in  marketing  the  crops  produced  by  their 
members  has  led  to  large  increase  in  acreage,  planted  partly 
by  growers  already  members,  and  partly  by  new  growers  seeking 
membership  by  the  time  their  plantations  have  come  into  bear- 
ing. The  policy  of  the  co-operative  marketing  organizations  has 
been  to  welcome  this  increased  acreage,  whether  it  represented 
new  plantings  by  existing  members  or  the  acquisition  of  new 
members  with  their  new  plantings.  The  door  to  these  organiza- 
tions has  always  been  open ;  and  they  have  undertaken  to  handle 
the  product  of  whatever  acreage  their  various  members,  acting 
as  individuals,  without  restriction,  might  see  fit  to  plant.  This 
is  as  it  should  be.    The  function  of  a  growers'  co-operative  mar- 

114 


115]  PRODUCTION,  DISTRffiUTION,   AND  PRICES  115 

keting  organization  is  to  promote,  rather  than  restrict,  produc- 
tion; to  make  increased  production  profitable,  by  reason  of  its 
efficiency  as  a  marketing  medium,  rather  than  to  increase  profits 
to  a  favored  few  or  per  unit  of  product,  by  curtailing  supply. 
With  each  increase  in  production,  the  respective  organizations 
have  extended  their  facilities  for  marketing,  stimulated  demand 
by  special  appeals  in  advertising  or  in  price,  and  effected  the 
distribution  of  the  goods,  instead  of  wasting  their  energy  in 
contemplating  means  of  restricting  production. 

The  variation  in  production  of  horticultural  products  from 
year  to  year  is  likely  to  be  large,  even  though  the  acreage  were 
the  same ;  for  no  two  seasons  are  equally  favorable  for  any  given 
crop  and  the  yields  of  horticultural  crops  are  especially  uncer- 
tain because  of  the  susceptibility  to  frost  injuiy,  and  the  wide 
variations  in  the  extent  of  that  injuiy  both  as  to  area  involved 
and  degree  of  injury  inflicted  within  the  area.  Under  exceed- 
ingly favorable  conditions  a  small  acreage  might  yield  a  much 
larger  volume  of  product  than  a  large  acreage  in  an  unfavorable 
season.  Control  of  acreage  would  therefore  not  necessarily  con- 
trol production.  That  is,  no  amount  of  control  over  acreage 
could  be  expected  to  result  in  uniform  production  from  year  to 
year.  Therefore,  even  if  an  attempt  should  be  made  to  control 
production,  it  would  be  ineffective  except  within  quite  wide 
limits.  The  only  logical  plan  for  the  marketing  organizations  to 
follow  is  the  one  which  they  have  adopted  —  viz.,  to  accept  all 
acreage  offered,  to  secure  as  careful  an  estimate  as  possible  of 
the  probable  yield,  and  to  plan  the  marketing  campaign  accord- 
ingly. 

The  production  of  horticultural  products  represents  an  enter- 
prise suitable  to  be  undertaken  by  individuals;  the  marketing 
of  these  products  can  be  facilitated  by  co-operation  among  neigh- 
bors ;  but  the  fact  that  a  grower  joins  a  marketing  organization 
does  not,  and  should  not,  involve  the  relinquishment  of  his  right 
as  an  individual  to  determine  the  various  details  of  his  own 
business,  including  the  acreage  he  will  plant,  and  the  special 
efforts  he  will  exert  with  a  view  to  securing  as  large  a  yield  as 
possible. 

The  next  questions  for  consideration  are:  (1)  Who  should 
determine  the  methods  to  be  employed  in  disposing  of  the  crop  ? 


116  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [116 

(2)  What  special  methods  of  disposition  may  be  resorted  to  in 
case  of  sudden  increase  in  production?  (3)  Who  should  deter- 
mine when  resort  should  be  made  to  these  special  methods  and 
what  portions  of  the  product  should  be  disposed  of  in  each  of 
the  various  ways? 

If  we  are  considering  an  independent  local  organization,  un- 
affiliated with  any  central  organization  composed  of  similar 
units,  the  answers  to  the  first  and  third  of  the  above  questions 
are  very  simple:  These  matters  should  be  determined  by  vote 
of  the  growers  who  compose  the  organization.  But  if  we  are 
considering  a  large  organization,  composed  of  a  number  of  local 
units,  and  handling  the  product  of  an  extensive  industry,  the 
answers  are,  perhaps,  not  quite  so  easily  reached.  Yet,  by  keep- 
ing in  mind  the  fact  that  in  a  truly  co-operative  organization, 
no  matter  how  large  or  how  complex,  the  final  authority  rests 
with  the  individual  growers,  it  will  be  clearly  seen  that  the  mar- 
keting policies  devised  for  handling  the  product  of  any  organi- 
zation must  rest  ultimately  upon  the  sanction  of  the  individual 
growers  as  expressed  by  vote  in  their  local  associations.  Even 
if  some  important  movement  originates  in  the  central  body, 
composed  of  representatives  of  the  locals,  its  acceptance  by  the 
organization  as  a  whole  should  be  dependent  upon  its  ratifica- 
tion by  vote  of  the  members  in  the  various  locals.  The  central 
body  may  suggest  radical  steps  to  be  taken ;  but  no  power  except 
a  majority  vote  of  the  membership  of  a  given  local  should  bind 
that  local  to  adopt  new  or  unusual  methods  in  the  disposition  of 
its  crop,  even  when  an  emergency  arises.  The  local  association 
is  the  unit  of  organization;  any  new  policies  of  importance  it 
adopts  should  be  based  upon  a  majority  vote  of  its  membership. 
The  central  body  should  have  power  to  advise,  but  not  dictate, 
regarding  changes  in  marketing  policy  to  meet  new  conditions 
from  time  to  time.  If  concerted  action  on  a  given  point  is  taken 
by  all  the  locals,  it  may  then  be  made  binding  upon  the  organ- 
ization as  a  whole,  through  formal  vote  of  the  representatives 
of  the  locals  in  the  central  body.  So  far  as  possible,  the  estab- 
lishment of  policies  should  anticipate,  rather  than  follow,  the 
occurrence  of  an  emergency. 

Having  disposed  of  the  question  as  to  who  should  have  author- 
ity to  determine  the  marketing  policies  of  an  organization,  in 


117]  PRODUCTION,  DISTRIBUTION,   AND  PRICES  117 

case  any  radical  changes  from  former  methods  may  seem  neces- 
sary, the  next  point  to  consider  is:  What  special  methods  of 
disposition  of  the  product  may  be  resorted  to  in  case  of  sudden 
increase  in  production,  or  other  causes  leading  to  an  apparent 
inadequacy  of  previously  employed  methods  to  effect  distribution 
of  the  entire  product?  Existing  facilities  for  marketing  may 
be  extended,  more  agents  employed,  new  markets  entered,  and 
special  advertising  to  increase  immediate  consumption  resorted 
to.  But  in  spite  of  these  efforts,  the  relation  between  supply 
(meaning  in  this  connection,  the  total  product  for  the  season, 
except  in  the  case  of  very  perishable  commodities)  and  demand 
(which  may  be  greatly  influenced  by  industrial  conditions  in  the 
region  of  the  principal  consuming  markets)  may  be  such  that  it 
is  impossible  to  dispose  of  the  entire  product  in  the  customary 
manner  at  prices  which  will  make  it  worth  while  to  continue 
shipping  to  distant  markets  all  grades  of  the  product  which 
have  previously  been  disposed  of  in  those  markets.  The  cost 
of  the  box,  packing,  freight,  refrigeration,  and  other  fixed 
charges  in  connection  with  the  marketing  of  a  package  of  fruit 
are  the  same  whether  the  fruit  is  high  grade  or  low  grade,  and 
whether  or  not  it  sells  for  enough  to  pay  for  those  costs.  When 
fruit  is  abundant,  and  high  grades  are  selling  in  a  given  market 
at  a  low  price,  purchasers  become  exceedingly  particular,  and 
low  grade  fruit  is  discriminated  against  much  more  severely 
than  when  the  general  level  of  prices  is  relatively  high.  This 
makes  it  very  difficult  to  sell  low  grade  fruit  under  the  circum- 
stances in  question ;  and  in  order  to  effect  sales  at  all,  the  price 
must  be  extremely  low.  The  longer  the  fruit  is  held,  the  more 
it  deteriorates;  and  unless  market  conditions  change,  the  lower 
the  price  at  which  it  must  ultimately  be  sold.  If  under  the  ex- 
isting conditions  in  an  eastern  market,  a  given  grade  of  fruit 
must  be  sold  at  a  price  so  low  that  it  will  not  cover  the  costs  of 
marketing,  it  might  better  never  have  been  shipped  —  unless 
the  growers'  organization  is  to  be  considered  as  actuated  pri- 
marily by  philanthropic  motives.  From  a  business  standpoint, 
the  only  logical  course  for  the  growers'  marketing  organization 
to  pursue  is  to  grade  the  fiTiit  more  rigidly  than  ordinarily,  and 
to  ship  to  the  distant  markets  only  such  grades  of  fruit  as  seem 
to  have  a  reasonable  prospect  of  selling  in  the  given  markets  for 


118  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [118 

a  price  sufficiently  high  to  return  to  the  grower  some  net  pro- 
ceeds after  all  marketing  expenses  have  been  deducted  from  the 
gross  sales. 

In  a  case  of  this  kind,  what  should  be  done  with  the  lower 
grades  of  fniit,  which  are  not  shipped  to  the  distant  markets? 
In  the  first  place,  all  the  local  markets  in  the  producing  region 
should  be  kept  supplied  to  their  full  capacity  at  low  prices.  The 
cost  of  marketing  would  be  slight,  for  there  need  be  no  expense 
for  packages  or  packing;  and  all  inhabitants  of  a  producing 
region  should  have  an  opportunity  to  feast  on  fruits  when  they 
are  abundant.  In  the  second  place,  all  markets  near  enough  to 
be  reached  without  resorting  to  refrigeration,  and  large  enough 
to  handle  fruit  of  the  given  kind  in  carload  lots  when  the  price 
is  low,  should  be  supplied  by  shipments  of  fruit  made  in  lug 
boxes,  without  packing.  In  the  third  place,  the  growers^  mar- 
keting organization  should,  if  possible,  find  some  outlet  for  its 
fruit  in  some  form  other  than  the  fresh  state.  This  has  already 
been  done  in  reference  to  certain  fruits.  For  example,  various 
kinds  of  deciduous  fruits  grown  by  members  of  the  California 
Fruit  Exchange  are  regularly  sold  to  canneries,  and  only  that 
portion  of  the  crop  shipped  to  eastern  markets,  which,  under 
the  existing  and  prospective  market  conditions,  promises  to  net 
the  grower  a  larger  return  per  unit  than  could  be  obtained  by 
selling  to  the  canneries.  That  is,  the  crop  of  a  given  kind  of  fruit 
is  handled  with  a  view  to  securing  for  the  growers  the  greatest 
possible  total  net  return,  under  the  existing  market  conditions, 
whether  disposed  of  in  eastern  markets  or  in  California,  and  the 
percentage  of  the  crop  shipped  east  will  vary  considerably  from 
year  to  year.  With  citinis  fruits,  the  situation  is  somewhat  dif- 
ferent ;  for  up  to  the  present,  comparatively  little  has  been  done 
toward  providing  outlets  for  the  fruit  which  cannot  be  sold  for 
use  in  the  fresh  state  at  a  price  that  will  net  the  grower  some- 
thing above  the  actual  cost  of  handling.  However,  a  start  has 
been  made,  in  the  establishment  of  a  factory  for  the  manufacture 
of  citrate  of  lime  by  a  subsidiary  organization  of  the  California 
Fruit  Growers  Exchange;  and  a  few  small  factories  have  been 
establislied  by  private  individuals  or  companies  for  the  manu- 
facture of  other  citrus  by-products,  with  a  view  to  utilizing  the 


119]  PRODUCTION,  DISTRIBUTION,   AND  PRICES  119 

grades  of  citrus  fruits  for  which  there  is  not  some  other  more 
profitable  outlet. 

In  seasons  when  the  crop  of  a  given  kind  of  fruit  is  small,  it 
will  pay  to  ship  lower  grades  to  eastern  markets  than  when  the 
crop  is  large.  It  is  merely  a  display  of  good  business  judgment 
to  withhold  from  eastern  markets  all  those  grades  of  fruit  which, 
under  existing  market  conditions,  would  not  be  fairly  certain  of 
selling  for  a  price  that  would  be  in  excess  of  the  costs  of  mar- 
keting. The  local  association  of  growers  in  a  co-operative  mar- 
keting organization  is  the  proper  body  to  determine  what  dis- 
position shall  be  made  of  the  lower  grades  of  the  fruit  produced 
by  its  members,  at  any  given  time;  and  it  should  make  the  de- 
cision whether  or  not  to  continue  shipping  a  given  grade,  in  case 
of  unfavorable  conditions  in  eastern  markets,  as  shown  by  infor- 
mation secured  through  the  central  organization  with  which  it 
is  affiliated. 

It  is  perfectly  clear  that  the  interests  of  the  growers  will  best 
be  served  if  shipments  of  a  given  grade  of  fruit  cease  when 
a  point  in  eastern  market  conditions  has  been  reached  at  which 
the  price  is  §o  low  on  that  grade  of  fruit  that  disposing  of  this 
fruit  in  the  producing  region  for  some  secondary  use  would  bring 
the  growers  a  larger  net  return  per  unit  of  the  fruit. 

In  case  the  product  is  one  which  does  not  lend  itself  readily 
to  secondary  uses,  and  is  also  of  a  perishable  nature,  it  is  a  some- 
what more  serious  question  as  to  what  disposition  should  be  made 
of  that  portion  of  the  crop  which,  by  reason  of  the  lowness  of  its 
grade  and  the  low  level  of  prices  in  eastern  markets,  would  not 
net  the  grower  something  above  the  cost  of  marketing.  Growers 
as  a  class  are  extremely  loath  to  destroy  any  food  product 
whatsoever ;  their  tendency  is  to  be  entirely  too  lax  rather  than 
too  severe  in  their  grading,  and  to  include  in  their  shipments 
lower  grade  products  than  should  ever  be  sent  to  market;  and 
their  disposition  as  individuals  is  to  continue  shipping  a  given 
grade  of  fi-uit  they  have  grown,  even  after  the  market  price  of 
that  gi-ade  has  reached  a  point  that  does  not  cover  the  expenses 
of  marketing.  Growers'  co-operative  marketing  organizations 
have  established  standards  of  grading;  the  shipment  of  " culls '* 
is  not  allowed;  and  if  these  culls  cannot  be  disposed  of  more 
profitably  in  some  other  manner,  they  are  fed  to  swine,  used  as 


120  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [120 

fertilizer  for  the  finiit  plantation,  spread  along  the  roadway  to 
assist  in  lajdng  the  dust,  or  dumped  into  a  ravine.  And  all  these 
methods  of  disposing  of  culls  have  met  the  approval  of  all  those 
who  understand  the  wisdom  of  refraining  from  attempting  to 
market  a  grade  of  product  which  the  market  does  not  desire. 
In  short,  the  destruction  of  culls  is  sanctioned  in  all  producing 
regions;  and  the  absence  of  those  culls  from  the  market  by 
reason  of  their  destruction  is  a  source  of  satisfaction  to  the  pur- 
chasers of  fruit,  even  though  they  may  not  know  it. 

From  the  standpoint  of  the  producer  the  ultimate  reason  w^hy 
culls  are  not  shipped  to  market  is  because  they  would  not  sell 
for  enough  to  cover  the  expenses  of  marketing;  or  in  other 
words,  because  the  crop,  with  the  culls  eliminated,  will  bring 
more  net  return  to  the  grower  than  if  the  culls  were  included. 
If  then,  market  conditions  become  such  that  the  next  grade 
higher  than  culls,  as  ordinarily  classified,  could  not  be  sold  for 
enough  to  cover  marketing  expenses,  there  would  be  the  same 
reason  for  the  growei's  to  withhold  it  from  shipment,  as  in  the 
case  of  culls  under  ordinary  conditions,  even  if  withholding  it 
from  shipment  necessitated  its  destruction  because  of  the  absence 
of  any  other  outlet.  When  there  is  not  sufficient  demand  for  a 
given  grade  of  fruit  to  result  in  its  purchase  at  a  price  that  will 
cover  the  expenses  of  marketing,  either  in  distant  or  local  mar- 
kets, and  no  secondary  uses  for  the  fruit  can  be  devised  that  will 
take  care  of  the  volume  in  question,  it  is  more  profitable  (or  less 
unprofitable)  for  the  grower  to  allow^  this  grade  of  fruit  to  rot 
on  his  ranch,  than  to  incur  expense  in  shipping  it  to  market. 
People  may  complain  about  the  social  injustice  of  allowing  food 
products  to  go  to  waste,  when  the  poor  of  the  cities  are  crying 
for  food.  Perhaps  the  grower  might  be  expected  to  give  away 
his  product  when  unable  to  sell  it;  and  doubtless  he  would  be 
willing  to  do  so  rather  than  see  it  rot;  but  there  is  no  justice 
in  expecting  him  to  pay  for  the  privilege  of  giving  the  product 
away. 

The  above  discussion  applies  primarily  to  products  of  a  per- 
ishable nature  and  in  which  there  is  wide  variation  in  quality  and 
degree  of  perfection  between  the  different  specimens  constituting 
the  crop  as  it  is  liai'\^ested.  The  most  striking  example  of  a  com- 
modity  of   this  character   is   the   cantaloupe.     Under  certain 


121]  PRODUCTION,  DISTRIBUTION,    AND  PRICES  121 

conditions  of  the  crop,  the  weather,  and  the  markets,  the  only 
recourse  that  will  save  the  shipper  from  the  necessity  of  paying 
freight  bills  on  unsalable  products  is  such  severe  grading  that 
over  half  the  specimens  are  discarded  as  unsuitable  for  shipment. 
If  this  rigid  grading  were  maintained  by  all  shippers  in  a  region, 
there  would  seldom  if  ever  be  any  occasion  for  suspending  ship- 
ments to  allow  the  markets  a  chance  to  dispose  of  their  surplus 
stock.  But  if,  in  spite  of  these  precautions,  the  markets  should 
become  temporarily  congested,  on  account  of  the  rapid  ripening 
of  the  melons  during  excessively  hot  weather,  an  organization 
of  growers  would  be  justified  in  suspending  shipments  for  two 
or  three  days  rather  than  pay  freight  on  more  melons  than  the 
markets  could  handle  before  they  spoiled. 

In  the  case  of  relatively  non-perishable  products,  such  as  rai- 
sins and  dried  peaches,  which  can  be  carried  over  until  the  next 
year,  if  necessary,  there  should  be  no  occasion  for  allowing  any 
of  the  product  to  go  to  waste ;  and  a  growers'  organization  would 
not  be  justified  in  destroying  any  portion  of  such  a  product. 

Prices  of  horticultural  products  are  determined  by  demand 
and  supply.  Most  horticultural  products  are  looked  upon  mainly 
as  luxuries  or  supplemental  articles  of  food,  rather  than  neces- 
sities or  staples.  Therefore  the  demand  for  these  products  is 
elastic;  and  relatively  small  changes  in  price  are  likely  to  be 
accompanied  by  comparatively  large  changes  in  amounts  taken. 
This  being  the  case,  people  would  curtail  their  purchases  if  the 
price  were  placed  abnormally  high  in  comparison  with  that  of  oth- 
er commodities  they  might  desire  to  purchase.  It  would  there- 
fore be  impossible  for  a  growers'  co-operative  marketing  organiza- 
tion, even  if  it  controlled  the  entire  supply  of  a  given  horticultur- 
al product  of  the  type  under  consideration,  to  sell  its  output  at  an 
arbitrary  price  fixed  without  reference  to  the  available  supply 
as  compared  with  the  demand  in  the  markets.  Before  California 
growers'  co-operative  organizations  undertook  the  marketing  of 
the  respective  products,  the  law  of  supply  and  demand  was 
hampered  in  its  operation  because  too  many  middlemen  and 
speculatoi's  intei^ened  between  the  producer  and  the  ultimate 
consumer.  In  striving  for  large  profits  per  unit  of  goods  handled, 
the  middlemen  curtailed  consumption  by  making  prices  high  to 
the  consumer,  and  in  some  cases  decreased  production  by  forcing 


122  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [122 

the  growers  to  accept  a  price  below  the  cost  of  production.  The 
individual  grower,  far  removed  from  the  real  consumer,  had 
little  influence  upon  the  price  he  would  receive  for  his  goods, 
and  no  influence  upon  the  price  the  consumer  would  pay.  Mid- 
dlemen largely  determined  the  prices  to  both  producer  and 
consumer.  It  is  right  that  the  grower  should  have  some  voice 
in  determining  the  price  at  which  he  will  sell  his  product.  It  is 
not  right  that  the  middlemen  should  make  large  profits  in  hand- 
ling his  products  when  part  of  those  profits  represent  losses  to 
the  grower  by  reason  of  his  being  forced  by  the  first  middleman 
in  the  series  to  part  with  his  goods  at  a  price  below  the  cost  of 
production.  While,  on  account  of  his  semi-permanent  invest- 
ment in  orchards,  a  grower  may  for  a  time  continue  to  produce 
fruits  which  he  is  unable  to  sell  at  a  price  as  high  as  the  cost 
of  production,  he  will  not  go  on  indefinitely  producing  f i-uit  for 
which  he  is  receiving  less  than  the  cost  of  production.  Under 
the  old  regime,  growers,  as  individuals,  were  powerless  to  change 
conditions;  and  conditions  did  not  change  of  their  o\^ti  accord, 
for  they  were  controlled  by  the  middlemen.  By  organization, 
the  gi^owers  have  been  enabled  to  shift  their  market  one  step 
nearer  the  consumer,  and  to  obtain  some  voice  in  deciding  the 
prices  at  which  they  wiU  sell  their  products.  This  has  made  it 
possible  for  the  growers  to  realize  prices  somewhat  above  the 
cost  of  production ;  but  the  very  nature  of  their  products  makes 
it  impossible  for  them  to  exact  prices  not  warranted  by  the  re- 
lation of  the  supply  to  the  demand. 

Co-operative  marketing  organizations  of  growers  are  not  re- 
garded as  combinations  in  restraint  of  trade,  as  interpreted  in 
the  administration  of  the  Sherman  Anti-Trust  Act  (1890)  and 
Cla3i;on  Amendment  (1914),  or  the  (California)  Cartwright 
Act  of  1907  as  amended  in  1909.  They  promote,  rather  than  re- 
strict, trade ;  and  their  influence  has  been  on  the  side  of  reduc- 
ing, rather  than  increasing,  the  cost  to  the  ultimate  consumer. 


CHAPTER  VIII 
REDUCING  THE  COST  TO  THE  CONSUMER 

In  spite  of  what  influence  co-operative  marketing  organizations 
of  growers  have  been  able  to  exert  in  the  direction  of  reducing 
the  cost  to  the  consumer,  the  consumption  of  horticultural  prod- 
ucts, especially  those  of  a  perishable  nature,  is  often  greatly  cur- 
tailed by  reason  of  costly  methods  of  distribution  employed 
after  the  goods  have  reached  the  wholesale  market. 

Various  investigations  have  been  made  to  determine  the  cost 
of  getting  different  products  from  the  producer  to  the  ultimate 
consumer,  under  prevalent  methods  of  distribution,  including  the 
profits  of  the  various  factors  through  whose  hands  the  goods 
ordinarily  pass.  Such  investigations  usually  disclose  the  fact 
that  the  most  important  factor  entering  into  the  high  cost  to  the 
consumer,  as  compared  with  what  the  producer  receives,  is  the 
existence  of  a  wide  margin  between  the  price  paid  by  the  retailer 
and  the  price  he  exacts  from  the  consumer.  This  margin  is 
likely  to  be  especially  wide  in  the  case  of  very  perishable  prod- 
ucts, and  is  sometimes  looked  upon  as  justified  by  reason  of  the 
risk  of  loss  due  to  spoilage,  in  addition  to  the  high  cost  of  service 
demanded  of  the  retail  dealer  by  consumers  under  modem  social 
conditions.  It  has  been  stated  ^  that '  *  retailers  commonly  charge 
twice  as  much  for  perishable  fruits  and  vegetables  as  they  cost, 
thus  making  their  margins  50  per  cent  of  selling  price;  some- 
times they  buy  lettuce  for  2  or  3  cents  a  head  and  sell  it  for  10 
cents;  and  they  take  out  similar  margins  on  a  few  other  highly 
perishable  commodities. ' '  However,  in  seeking  to  protect  himself 
from  loss  due  to  spoilage  of  perishable  products  while  in  his 
possession,  the  retailer  adopts  the  very  means  that  will  tend  to 
increavse  the  volume  of  spoilage;  to  wit:  fixing  the  price  at  so 
high  a  level  that  sales  are  slow,  thus  resulting  in  a  portion  of 

iWeld,  L.  D.  H.,  The  Marlccting  of  Farm  Troducts,  p.  434. 

123 


124  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [124 

his  unit  of  purchase  remaining  in  liis  hands  an  unnecessary 
length  of  time,  and  greatly  increasing  the  risk  of  deterioration 
and  decay.  That  a  moderate  reduction  in  retail  prices  may  greatly 
increase  the  sales  and  consumption  of  such  a  product  as  oranges, 
is  amply  proved  by  the  experience  of  retailers  who  have  followed 
the  suggestions  of  the  Dealer  Service  men  of  the  California  Frait 
Growers  Exchange  and  substituted  a  policy  of  large  volume  of 
sales  at  a  smaller  margin  for  their  former  policy  of  large  margins 
per  unit  of  sale.  The  reduction  in  loss  due  to  deterioration  and 
spoilage,  by  reason  of  the  rapidity  of  sales,  has  been  an  impor- 
tant factor  in  increasing  the  retailers'  profit  under  the  new 
method.  The  goods  are  moved  out  before  they  have  time  to  spoil. 
However,  many  fruits  and  vegetables  are  very  much  more 
perishable  than  oranges,  and  under  present  methods  of  handling 
in  most  retail  stores,  the  loss  from  deterioration  is  enormous. 
Lowering  the  prices  would  move  the  goods  more  rapidly  and 
stop  part  of  this  waste;  but  something  more  is  needed.  Very 
few  retail  stores  make  any  pretense  at  provisions  for  preserving 
the  freshness  of  finiits  and  vegetables.  Lettuce  that  has  been 
shipped  under  refrigeration  from  California  to  Chicago  or  Pitts- 
burgh at  great  expense,  is  unpacked  and  exposed  to  the  warm 
dry  air  of  a  retail  store  in  a  neighboring  suburb,  where  layer 
after  layer  of  the  wilted  leaves  is  discarded  from  the  heads  re- 
maining unsold  as  the  days  go  by.  Lettuce  that  has  been  per- 
fectly preserved  by  proper  precautions  during  its  long  journey 
from  the  Pacific  Coast  is  allowed  to  deteriorate  rapidly  in  the 
hands  of  the  retailer  because  no  attention  is  paid  to  providing 
facilities  for  its  preservation.  What  is  time  of  lettuce  is  true 
also  of  a  number  of  other  vegetables  and  of  many  fruits.  Careful 
attention  is  given  to  providing  every  known  means  for  their 
preservation  from  the  time  they  are  harvested  on  the  ranch  of 
the  producer  until  they  reach  the  store  of  the  retailer ;  and  then 
all  precautions  cease,  resulting  in  a  great  economic  waste.  Prod- 
ucts that  with  proper  handling  could  be  kept  in  good  condition 
in  the  retail  store  for  four  or  five  days  are  practically  worthless 
if  earned  by  the  retailer  beyond  the  second  day.  Perishable 
fruits  and  vegetables  arrive  from  distant  producing  points  un- 
der refrigeration ;  wholesalei^  of  such  products  provide  facilities 
for  keeping  them  cool;  people  equip  their  houses  with  refriger- 


125]  REDUCING  THE  COST  TO  THE  CONSUMER  125 

ators  for  preserving  the  food  products  after  they  receive  them 
from  the  retailer ;  but  the  ordinary  retailer  takes  no  precautions 
whatever  to  preserv^e  the  freshness  of  fruits  or  vegetables  while 
they  are  in  his  store.  His  failure  in  this  regard  vitiates  to  a 
large  degi-ee  the  value  of  the  efforts  expended  by  all  other  factors 
in  attempting  to  place  country  products  on  city  tables,  in  perfect 
condition. 

The  failure  of  retail  stores  to  provide  facilities  for  preserving 
fruits  and  vegetables  in  a  fresh  and  sound  condition  is  not  with- 
out reason.  Most  retail  stores  that  handle  fresh  f raits  and  vege- 
tables carry  them  as  an  incidental  line  in  connection  with 
groceries  and  perhaps  other  commodities.  Even  the  small  grocery 
stores  scattered  through  the  residence  districts  of  the  medium- 
sized  and  smaller  cities  attempt  to  carry  at  least  a  meaner  line 
of  fiTiits  and  vegetables.  Stores  which  serve  only  a  limited  num- 
ber of  families  and  deal  in  staples  rather  than  fancy  groceries, 
do  not  handle  sufficient  quantities  of  perishable  fraits  and  veg- 
etables to  warrant  their  incurring  any  considerable  expense  in 
providing  facilities  for  the  proper  care  of  such  products  while 
in  their  possession. 

Perishable  fruits  and  vegetables  will  never  be  placed  in  the 
hands  of  consumers  in  uniformly  acceptable  condition,  nor  the 
economic  waste  that  occurs  in  the  hands  of  retailers  eliminated, 
until  the  perishable  nature  of  such  products  is  clearly  recognized 
by  retailers  in  general,  and  their  handling  relegated  to  such 
dealers  as  will  provide  proper  equipment  for  their  preservation. 
There  is  no  more  reason  for  expecting  every  grocery  store  to 
handle  fresh  fruits  and  vegetables,  than  there  would  be  for 
expecting  it  to  handle  fresh  meats  and  fish.  Only  those  dealers 
who  have  facilities  for  controlling  the  temperature  and  moisture 
conditions  in  certain  portions  of  their  establishments  of  sufficient 
size  to  accommodate  their  entire  stocks  of  perishable  products  are 
expected  to  act  as  retailers  of  meats  and  fish.  Until  the  same 
attitude  is  taken  in  reference  to  the  retailing  of  perishable  fruits 
and  vegetables,  the  enonomic  waste  that  occurs  in  the  hands  of 
the  retailer  cannot  be  wholly  eliminated.  There  should  be  fewer 
retailers  of  fruits  and  vegetables  in  each  city,  and  these  should 
have  their  stores  fully  equipped  with  refrigeration  facilities,  and 


126  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [126 

other  means  for  keeping  their  supplies  in  the  best  possible 
condition. 

If  the  number  of  such  stores  in  a  large  city  were  so  small  that 
each  served  several  thousand  people,  it  would  be  possible  for  the 
proprietors  to  purchase  many  of  their  supplies  in  large  quan- 
tities directly  from  organizations  of  producers,  and  thus  effect 
additional  savings  in  the  cost  of  distribution  from  producer  to 
consumer,  by  reason  of  acting  as  their  own  jobbers,  availing 
themselves  of  carload  freight  rates,  and  doing  their  own  trucking 
from  railway  station  to  store. 

It  is  probable  that  small  cities  would  be  best  served  if  there 
were  only  one  retail  fruit  and  vegetable  dealer  in  each.  There 
would  be  no  more  likelihood  of  his  charging  exorbitant  prices 
because  of  lack  of  competition  than  was  true  of  the  local  butcher 
who  in  former  years  supplied  a  town  with  its  meats;  and  he 
would  be  able  to  carry  a  better  assortment  of  fresher  stock  than 
could  a  number  of  competing  firms  handling  fruits  and  veg- 
etables along  with  other  table  supplies.  In  a  small  town,  where 
the  demand  for  finiits  and  vegetables  is  insufficient  to  warrant 
the  maintenance  of  an  exclusive  fruit  and  vegetable  store,  these 
products  could  be  handled  with  much  less  waste  and  more  satis- 
faction in  connection  with  a  meat  market,  with  its  refrigeration 
equipment,  than  in  connection  with  a  grocery  store.  Until  the 
necessity  of  making  fruits  and  vegetables  prominent,  if  not  ex- 
clusive, features  in  the  stores  that  handle  them  is  recognized,  and 
facilities  for  their  preservation  are  provided,  the  retailing  of 
these  commodities  will  continue  to  be  attended  with  enormous 
waste. 

If  fruit  and  vegetable  stores  of  the  type  suggested  were 
started  in  the  various  cities  under  the  proprietorship  and  man- 
agement of  capable  business  men,  well- versed  in  the  handling  of 
the  products  in  question,  the  superior  condition  of  the  products 
as  delivered  to  the  consumer,  and  the  reduction  in  price  made 
possible  by  the  elimination  of  waste  as  indicated,  should  lead 
to  the  ultimate  absorption  of  the  retail  f niit  and  vegetable  trade 
of  the  respective  cities  by  such  firms,  and  the  cessation  of  at- 
tempts to  handle  these  products  as  side  lines  on  the  part  of  stores 
not  properly  equipped  for  such  service. 

In  cases  where  private  enterprise  failed  to  grasp  the  oppor- 


127]  REDUCING  THE  COST  TO  THE  CONSUMER  127 

tunity  for  thus  serving  the  needs  of  a  community,  the  munici- 
pality might  well  afford  to  equip  and  operate  a  store  or  stores, 
as  might  be  necessary  properly  to  supply  the  needs  of  the  city's 
inhabitants  in  reference  to  fruits  and  vegetables.  This  would 
relieve  the  grocers  from  the  necessity  of  carrying  a  line  of  goods 
that,  under  usual  conditions,  is  a  constant  source  of  annoyance, 
because  of  deterioration  and  spoilage  due  to  the  impracticability 
of  providing  proper  equipment  for  the  care  of  the  small  volume 
ordinarily  handled  in  each  retail  establishment. 

If,  in  addition  to  the  concentration  of  the  fruit  and  vegetable 
business  of  each  city  into  a  small  number  of  properly  equipped 
stores,  an  efficient,  economical  and  sane  delivery  service  were  es- 
tablished, the  costs  of  getting  fruits  and  vegetables  from  the 
producer  to  the  consumer  could  be  very  materially  reduced. 

The  above  discussion  refers  primarily  to  the  handling  of  prod- 
ucts which  are  shipped  into  cities  from  more  or  less  distant 
sources.  In  the  case  of  fruits  and  vegetables  produced  within 
hauling  distance  from  the  city  where  they  are  consumed,  the 
cost  of  getting  the  goods  from  the  producer  to  the  consumer 
could  be  very  much  further  reduced  if  the  municipality  would 
establish  and  maintain  a  system  of  properly  equipped  and  or- 
ganized public  markets  where  producers  could  sell  directly  to 
consumers.  However,  the  success  of  such  an  enterprise  would 
depend  upon  the  consumers  being  willing  to  give  personal  at- 
tention to  their  purchases,  and  attend  to  their  own  deliveries, 
except  in  the  case  of  heavy  articles  bought  in  large  quantities. 
For  the  handling  of  these,  the  municipality  could  readily  main- 
tain a  delivery  service  operated  in  connection  with  the  market, 
and  managed  along  economical  lines.  To  cover  the  cost  of  this 
service  a  slight  charge  could  be  made  for  each  delivery. 

In  a  municipal  market  of  the  type  indicated,  there  would  be 
practically  no  loss  from  spoilage,  for  fresh  goods  would  be 
brought  in  directly  from  the  ranches  each  morning  the  market 
was  in  operation,  and  any  perishable  goods  remaining  unsold 
would  be  hauled  back  to  the  ranches  and  diverted  to  secondary 
uses  by  the  producers. 


CHAPTER  IX 

APPLICABILITY     OF      CALIFORNIA      CO-OPERATIVE 

MARKETING  METHODS  TO  OTHER  PRODUCING 

REGIONS 

The  great  distance  of  California  from  the  principal  consum- 
ing markets  of  the  country  has  been  an  important  factor  in 
emphasizing  the  necessity  of  organized  methods  of  marketing 
her  products ;  and  the  concentration  of  production  of  given  com- 
modities within  limited  areas  has  greatly  facilitated  the  develop- 
ment of  producers'  co-operative  marketing  organizations;  while 
the  immense  volume  of  certain  types  of  her  products  has  made 
possible  the  adoption  of  large-scale  methods  of  distribution,  in- 
cluding the  maintenance  of  salaried  representatives  and  the  in- 
auguration of  nation-wide  advertising  campaigns.  California's 
unique  and  commanding  position  among  horticultural  states,  in 
that  many  of  her  important  products  are  grown  commercially  in 
very  few  of  the  other  states,  has  made  feasible  the  development 
of  a  much  wider  marketing  area  than  might  otherwise  have  been 
expedient.  With  few  exceptions,  California's  marketing  prob- 
lem has  been  to  extend  the  use  of  her  products,  not  by  securing 
their  substitution  for  similar  products  from  other  states,  but 
rather  by  educating  the  consuming  public  to  an  appreciation  of 
the  advantages  to  be  derived  from  using  certain  California 
products  in  addition  to  their  customary  purchases,  or  in  some 
cases  as  substitutes  for  importations  from  foreign  countries.  For 
the  most  part,  these  commodities  were  not  extensively  used  in 
America  until  California  began  to  produce  them  in  quantity,  and 
was  obliged  to  resort  to  special  means  for  encouraging  their  con- 
sumption in  eastern  markets. 

On  the  other  hand,  the  important  types  of  horticultural  prod- 
ucts of  the  eastern  states  other  than  Florida  have  been  quite 
generally  grown  on  the  farms  of  New  England,  the  Middle  At- 

128 


129]  CO-OPERATIVE  MARKETING  METHODS  129 

lantic  states,  and  the  Mississippi  Valley  ever  since  agriculture 
became  fully  established  in  the  respective  regions;  and  eastern 
people  have  been  accustomed  to  their  use  for  generations.  As 
manufacturing  and  trading  centers  increased  in  population, 
there  developed  within  hauling  distance  of  each  one  or  more 
truck-producing  areas  which  supplied  the  inhabitants  with  hor- 
ticultural products  of  a  perishable  nature.  As  time  went  on 
and  transportation  facilities  improved,  the  same  kinds  of  prod- 
ucts were  grown  farther  and  farther  from  the  markets,  the  loca- 
tions of  the  new  producing  areas  being  determined  largely  by 
soil  and  climatic  conditions,  in  addition  to  transportation  facil- 
ities. There  was  a  special  tendency  to  extend  the  producing 
regions  southward  for  the  sake  of  supplying  the  northern  markets 
with  given  products  earlier  in  the  season  than  local-grown  sup- 
plies were  available.  Thus  it  has  come  about  that  there  are  a 
large  number  of  more  or  less  widely  scattered  producing  regions 
for  each  of  the  important  horticultural  products  of  the  eastern 
portion  of  the  United  States,  and  that  the  various  important 
producing  regions  depend  mainly  upon  the  same  marketing 
centers  for  the  disposition  of  their  products.  The  difference  in 
the  time  of  maturity  of  the  same  perishable  product  in  different 
regions  makes  it  possible  for  the  markets  to  be  supplied  suc- 
cessively from  different  localities ;  but  since  the  ripening  seasons 
in  several  localities  overlap,  and  not  infrequently  coincide,  each 
of  the  principal  markets  of  the  country  is  likely  to  receive 
supplies  of  the  same  product  from  a  number  of  widely  separated 
regions  at  the  same  time.  This  often  results  in  great  economic 
waste  due  to  the  transporting  of  goods  much  greater  distances 
than  would  be  necessary  fully  to  supply  the  various  markets  if 
a  more  systematic  method  of  distribution  could  be  inaugurated. 
In  the  case  of  the  less  perishable  horticultural  products  also, 
especially  those  subject  to  winter  storage,  the  various  markets 
are  supplied  from  widely  scattered  producing  regions,  without 
much  apparent  discrimination  as  to  the  relative  locations  of 
the  respective  producing  and  consuming  centers.  Here  again 
the  costs  of  distribution  could  be  greatly  decreased  if  each  mar- 
ket were  supplied  with  a  given  commodity  from  the  most  ac- 
cessible producing  regions  for  that  commodity.  It  is  true  that 
production  varies  between  wide  extremes  in  the  various  produe- 


130  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [130 

ing  regions  from  year  to  year,  so  that  the  same  market  cannot 
procure  all  its  needed  supplies  of  a  given  commodity  from  the 
same  localities  every  year;  but  if  each  year  the  supplies  were 
secured  from  the  most  readily  accessible  sources  that  year,  it 
would  be  a  great  improvement  over  the  present  method  of  in- 
discriminate criss-cross  shipments  through  the  area  in  which 
the  chief  consuming  markets  are  located.^ 

The  question  is:  How  could  such  a  inform  in  distribution 
methods  be  instituted?  Would  it  be  possible  to  effect  a  com- 
prehensive organization  of  a  large  proportion  of  the  producers 
of  each  of  the  important  horticultural  products  east  of  the  Great 
Plains,  and  secure  a  distribution  of  the  products  from  the 
various  producing  regions  to  the  different  markets  of  the  coun- 
try in  a  manner  somewhat  similar  to  that  employed  by  the  Cal- 
ifornia Fruit  Growers  Exchange  or  some  other  of  the  California 
organizations? 

Local  associations  of  producei*s,  organized  on  lines  similar  to 
those  employed  by  local  associations  in  California,  are  perfectly 
feasible  under  eastern  conditions  in  localities  where  large  quan- 
tities of  a  given  product  are  grown.  This  is  attested  by  the 
marked  success  of  certain  such  organizations.  Nevertheless,  the 
various  producing  regions  for  a  given  commodity  are  in  most 
cases  scattered  over  so  wide  a  territory  that  frequent  personal 
contact  and  intimate  relationship  among  the  representatives  of 
the  different  regions  are  impracticable.  Without  such  contact 
and  relationship  it  is  impossible  to  bind  together  the  various 
units  into  one  comprehensive  working  organization,  in  which  the 
interests  of  each  and  every  local  association  can  be  given  due 
consideration.  The  geographical  distribution  of  the  producing 
areas  renders  a  general  organization  of  the  producers  imprac- 
ticable. 

What,  then,  can  be  done  to  effect  an  improvement  in  the  dis- 
tribution of  the  products?  As  already  stated,  local  associations 
of  producers  are  perfectly  feasible.     In  some  regions,  an  affili- 

1  The  above  was  wiitten  before  the  Food  Administration  was  established 
or  the  railroads  were  placed  under  government  control.  The  indiscriminate 
criss-cross  shipment  of  certain  c-ommodities  has  since  been  eliminated  by 
government  order. 


131]  CO-OPERATIVE  MARKETING  METHODS  131 

ation  of  neighboring  local  organizations  could  readily  be  effected, 
and  might  greatly  facilitate  the  marketing  of  the  product  from 
the  entire  region.  Yet,  something  more  is  needed  if  a  compre^ 
hensive  and  economical  distribution  of  the  country's  products 
is  to  be  effected.  The  work  of  the  Office  of  Markets  and  Rural 
Organization,  of  the  United  States  Department  of  Agriculture, 
in  gathering  and  disseminating  infonnation  regarding  croip 
movements  and  market  conditions  suggests  that  an  extension  of 
this  service  might  be  made  the  means  of  enabling  the  various 
producing  regions  to  place  their  products  more  intelligently,  =^ 
and  the  consumers  in  the  various  markets  to  take  advantage  of 
variations  in  the  supply  of  given  commodities. 

Not  only  should  the  producers  be  furnished  with  information 
regarding  the  actual  movement  of  horticultural  products,  the 
quantities  in  prospect  in  the  various  producing  regions,  and 
the  conditions  in  the  various  markets;  but  consumers,  also, 
should  be  given  access  to  information  that  will  enable  them  to 
be  of  the  most  assistance  in  the  movement  of  penshable  com- 
modities. Such  information  would  be  especially  effective  in  the 
case  of  commodities  for  which  there  are  secondary  uses  in  addi- 
tion to  their  primary  use  in  the  fresh  state.  For  example,  the 
quantities  of  strawberries,  blackberries,  plums  or  peaches  pur- 
chased in  a  given  market  will  be  much  greater  if  considerable 
portions  of  the  purchases  are  to  be  used  for  canning  or  preserv- 
ing than  if  all  are  to  be  consumed  in  the  fresh  state.  Consumers 
do  not  ordinarily  purchase  fruit  for  canning  until  the  price  at 
which  it  is  offered  is  lower  than  that  at  which  they  would  be  will- 
ing to  purchase  an  ample  supply  for  immediate  use.  However, 
when  the  supply  on  a  given  market  increases  beyond  the  normal 
demands  for  use  in  the  fresh  state,  the  possibility  of  selling  it  for 
canning  makes  the  price  remain  higher  than  it  would  be  if  no 
such  outlet  were  available.  Therefore,  it  would  be  a  decided 
advantage  to  the  producer,  the  dealer,  and  the  consumer,  if 
the  fact  were  generally  known  among  consumers  a  day  or  two 
in  advance  when  large  supplies  of  a  given  perishable  commodity 

2  This  service  has  been  greatly  extended  since  the  above  was  written,  and 
is  rapidly  becoming  an  important  factor  in  the  marketing  of  perishable 
products. 


132  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [132 

were  expected  in  a  given  market.^  The  most  feasible  plan  of 
furnishing  such  information  to  consumers  would  be  to  have  it 
published  in  the  daily  press  of  the  respective  cities,  the  ''copy'* 
for  publication  being  furnished  by  wire  from  Washington,  and 
not  subject  to  editorial  alterations. 

When  furnishing  information  to  shippers,  the  Office  of  Mar- 
kets* could  be  of  signal  assistance  in  diminishing  the  economic 
waste  in  distribution,  by  pointing  out  to  the  shippers  of  each 
locality  the  desirability  of  supplying  the  needs  of  the  particular 
markets  to  which  their  respective  regions  are  naturally  tributary, 
under  the  conditions  existing  at  that  particular  time.  This 
method  of  influencing  distribution  would  be  most  effective  where 
the  growers  are  organized  for  marketing  purposes  and  where 
the  volume  of  shipments  from  the  region  is  sufficient  to  warrant 
the  Office  of  Markets  in  maintaining  a  man  in  the  locality  during 
the  shipping  season.  As  suggested  in  connection  with  the  dis- 
cussion regarding  Imperial  Valley  cantaloupes,  much  depends 
upon  the  personality  and  resourcefulness  of  the  men  who  are 
detailed  by  the  government  for  such  service.  It  is  possible  that 
the  time  may  come  when  a  corps  of  men  employed  by  the  gov- 
ernment, and  detailed  to  the  various  producing  regions  and  con- 
suming markets,  will  practically  determine  the  distribution  of 
perishable  horticultural  products,  even  though  they  issue  no 
orders  and  assume  no  authority. 


3  In  Providence,  Rhode  Island,  the  marketing  of  home  grown  vegetables 
(especially  spinach)  was  greatly  facilitated  in  the  spring  of  1917  by  advis- 
ing consumers  in  advance  when  heavy  supplies  were  in  prospect.  This 
method  has  since  been  employed  in  other  cities. 

*  Now  Bureau  of  Markets. 


BIBLIOGRAPHY 

Records  of  jVIarketing  Organizations 

Minutes  of  Meetings  of  Executive  Board  of  Southern  Califor- 
nia Fruit  Exchanges,  May  16,  1894-Nov.  1,  1895. 

Minutes  of  Board  of  Directors  of  Southern  California  Fruit 
Exchange,  Nov.  1,  1895-Oct.  11,  1905. 

Minutes  of  Board  of  Directors  of  California  Fruit  Growers 
Exchange,  Apr.  19,  1095-Apr.  26,  1916. 

Minute  Book,  Fruit  Growers  Supply  Co.,  Oct.  9,  1907-Mar.  18, 
1914. 

Arbitration  of  the  Controversy  between  Abbot  Kinney  and 
A.  H.  Naftzger.  Reporter's  transcript.  Two  volumes 
[typewritten].  In  office  of  California  Fruit  Growers  Ex- 
change, Los  Angeles. 

Typewritten  documents,  agreements  and  contracts  on  file  in 
the  office  of  the  California  Fruit  Growers  Exchange. 

Minutes  of  the  Executive  Committee  of  the  various  Walnut 
Growers'  Associations  of  Southern  California,  Apr.  12, 
1905-Apr.  10,  1912. 

P^IODICALS  AND   REPORTS 

V  California  Cultivator,  Los  Angeles,  Cal.  Especially  1893- 
1900.     [In  office  of  California  Cultivator,  Los  Angeles] . 

California  Fruit  News,  San  Francisco,  Cal.  Especially  1915 
and  1916. 

Pacific  Coast  Packer,  Los  Angeles,  Cal.  Especially  1915,  1916, 
1917. 

Pacific  Rural  Press,  San  Francisco,  Cal.  Especially  1880- 
1885. 

Riverside  Daily  Press,  Riverside,  Cal.  1897-1907.  [In  River- 
side Public  Library] . 

Riverside  Press  and  Horticulturist,  Riverside,  Cal.  1882- 
1895.     [In  Riverside  Public  Library]. 

133 


134  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [134 

Rural  Califomian,  Los  Angeles,  Cal.  Especially  1893-1899. 
[In  office  of  California  Cultivator,  Los  Angeles]. 

Sun-Maid  Herald.     Especially  Oct.,  1915-July,  1916. 

The  Sun-Maid  Herald  is  a  "house  organ"  published  by  the 
California  Associated  Raisin  Co.,  at  Fresno,  Cal.  The  first 
issue  was  that  of  August,  1915,  and  it  has  been  issued 
monthly  since  that  date. 
\/  Annual  and  Biennial  Report  of  the  State  Board  of  Horticul- 
ture of  the  State  of  California.  Especially,  reports  for  1885- 
m,  1889,  1890,  1892,  1895-96,  1899-1900. 

Reports  of  State  Fruit  Growers'  Conventions  of  the  State  of 
California.     [Variously  designated:  Proceedings,  Transac- 
tions, and  Official  Reports]. 
Special  Literature 

A  Brief  History  of  the  Deciduous  Fruit  Industry  of  Califor- 
nia.   Published  by  California  Fruit  Exchange,  Jan.,  1913. 

Adams,  Arthur  B.  Marketing  Perishable  Farm  Products. 
Studies  in  History,  Economics  and  Public  Law,  Vol.  LXXII, 
No.  3.    New  York,  Columbia  University,  1916. 

AUes,  Fred  L.  California  Fruit  Exchanges  vs.  The  Commis- 
sion System.  California  Cultivator,  Nov.,  1895,  pp.  381- 
383. 

Bassett,  C.  E.,  and  Moomaw,  C.  W.  Co-operative  Marketing, 
and  Financing  of  Marketing  Associations.  Yearbook,  U.  S. 
Dept.  of  Agi\,  1914,  pp.  185-210. 

Brooks,  T.  J.  Markets  and  Rural  Economics.  New  York, 
The  Shakespeare  Press,  1914. 

Chamblin,  T.  H.  B.  Co-operative  Fruit  Marketing.  Rural 
Califomian,  Feb.,  1894,  p.  68. 

.     The  Orange  Exchanges.    Rural  Califomian,  Dec. 

1894,  pp.  635-636. 

Chandler,  W.  H.  Co-operation  Among  Fruit  Growers.  Mo. 
Agr.  Exp.  Sta.  Bui.  No.  97,  July,  1911. 

Chapman,  C.  C.  Citrus  Fruits.  Rural  Califomian,  June, 
1899,  p.  216. 

Cochran,  H.  W.  The  Results  of  Co-operation  in  the  Raisin 
Industry  of  California.  Thesis,  U.  of  C,  1915.  [Type- 
written.! 


135]  BIBLIOGRAPHY  135 

Collins,  W.  E.    Citrus  Fruit  Co-operation.    Eural  Calif ornian, 

Oct.  1894,  p.  533. 
.     Co-operation  among  Fruit  Growers.    Rural  Cali- 

fomian,  Dec.  1893,  pp.  655-656. 
Corbett,  L.  C.    A  Successful  Method  of  Marketing  Vegetable 

Products.     Yearbook,  U.  S.  Dept.  of  Agr.,  1912,  pp.  353- 

362. 
Coulter,  John  Lee.    Co-operation  among  Farmers.    New  York, 

Sturgis  &  Walton  Co.,  1911. 
Cyclopedia  of  American  Agriculture.    Co-operative  Marketing 

in  Fruits.     Vol.  IV,  pp.  265-267. 
V     Dreher,  P.  J.     Early  History  of  Co-operative  Marketing  of 

Citrus  Fruit.     California  Citrograph,  Oct.  1916,  pp.  2,  3, 

17,  18. 
Fox,  F.  Y.    Co-operation  in  the  Raisin  Industry  of  California. 

Thesis,  U.  of  C,  1912.     [Typewritten.] 
Hamilton,  Hiram.     The  Orange  Crop  and  a  Market.    Rural 

Califomian,  Aug.  1895,*pp.  379-380. 
Hoag,  I.  N.     Marketing  Citrus  Fruits.     Rural  Califomian, 

Mar.  1898,  pp.  54-55. 
Holmes,  E.  W.    History  of  Riverside  County,  California.  Los 

Angeles,  Historic  Record  Company,  1912. 
.     What  of  the  Future  for  Citrus  Fruits?     Rural 

Califomian,  Aug.  1897,  pp.  281-282. 
Holmes,  Geo.  K.     Systems  of  Marketing  Farm  Products  and 

Demand  for  Such  Products  at  Trade  Centers.    Report  No. 

98,  U.  S.  Dept.  of  Agr.,  Office  of  Secretary,  Jan.  1913. 
Jeffrey,  J.  W.    Co-operation  vs.  Combination.    California  Cul- 
tivator, May  25,  1900,  p.  323. 
.      Underlying    Principles.      California    Cultivator, 

June  15,  1900,  p.  371. 
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Oct  12,  1900,  pp.  227-228. 

.    Wrong  Point  of  View.    Califomia  Cultivator,  Oct. 


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cific Rural  Press,  Dec.  10,  1898,  p.  380. 


136  MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS  [136 

Los  Angeles  Herald.  The  Southern  California  Fruit  Ex- 
change. Great  Success  of  the  Co-operative  System  of  Sell- 
ing  Fruit    June  27,  1897,  pp.  16-17. 

^       .     Great  Southern   California  Orange  Demoralized 

and  no  Relief  is  Promised.     Charges  and  Counter-charges 
are  made  by  Various  Interests  While  Growers  Suffer  Heavy 
Losses.     Mar.  15,  1904,  p.  9. 
^     Los  Angeles  Times.     Hammer  out  of  Business.     New  Fruit 
Merger  Curbs  the  Middleman.    Mar.  31,  1903,  p.  7. 

Naftzger,  A.  H.  Conditions  Leading  to  the  Organization  of 
the  California  Fruit  Agency.  Riverside  Daily  Press,  June 
5,  1903,  p.  5. 

.    Marketing  California  Oranges  and  Lemons.    Land 

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Powell,  Fred  AVilbur.  Co-operative  Marketing  of  California 
Fresh  Fruit.  Quarterly  Journal  <^  Economics,  1910.  Vol. 
24,  pp.  392-418. 

Powell,  G.  Harold.  Annual  Reports  of  General  Manager, 
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.     Co-operation  in  the  Handling  and  Marketing  of 


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The  Western  Fruit  Jobber,  Mar.  1916,  pp.  14-23. 

'■ — .     The  Cost  of  Distributing  the  California  Citrus 


Fruit  Crop  from  the  Producer  to  the  Consumer.    The  Wes- 
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.    The  Decay  of  Oranges  While  in  Transit  from  Cal- 


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Agr.  Bui.  No.  401,  Oct.  1916. 


137]  BIBLIOORAPHY  137 

Stroud,  J.  W.  Perishable  Products  and  Associational  Selling. 
Marketing  and  Farm  Credits.  National  Conference  oH 
Marketing  and  Farm  Credits,  1915,  pp.  129-134. 

Sullivan,  J.  W.  Markets  for  the  People.  The  Consumer's 
Part.    New  York,  The  Macmillan  Company,  1913. 

Taylor,  R.  H.  Marketing  California  Almonds.  The  Univer- 
sity of  California  Journal  of  Agriculture,  Oct.,  1916,  pp. 
44-45. 

Weinstock,  H.  Review  of  the  Work  of  the  California  Fruit 
Growers  and  Shippers'  Association.  Proceedings  of  Nine- 
teenth State  Fruit  Growers'  Convention,  Nov.  1895,  pp. 
10-17. 

Weld,  L.  D.  H.  The  Marketing  of  Farm  Products.  New  York, 
The  Macmillan  Company,  1916. 

Woehlke,  Walter  V.  In  the  Orange  Country.  [Sub-title] 
Where  an  Orchard  is  a  Mine.  The  Human  Factor  among 
the  Gold-Bearing  Trees  of  California.  Sunset  Magazine, 
Mar.  1911,  pp.  251-264. 

.     In  the  Service  of  Quality.    The  Outlook,  Oct.,  23, 

1909,  pp.  417-427* 

Woodford,  B.  A.  Organized  Fruit  Marketing.  Proceedings. 
Thirty-ninth  Fruit  Growers'  Convention  of  the  State  of 
California,  Mar.  1911,  pp.  85-89. 


INDEX 


Adams,  C.  D.,  14 

Advantages  of  co-operative  market- 
ing, 13 

Advertising,  17,  23,  24,  25,  26,  27, 
29,  115,  117,  128 

Affiliation  of  local  organizations,  87 

ADes,  Fred  L.,  15 

Almonds,  11,  20,  96,  100,  101 

Apples,   11,   30,  96,  97 

Applicability  of  co-operative  market- 
ing to  other  regions,  128 

Attempts  to  combine  growers  and 
dealers,   53,   65 

Auction  sales  of  fruit,  98 

Banks,  attitude  of,  75,  77,  81,  111 

Berries,   11,  95,   96,   131 

Bibliography,  133 

' '  Blue  Diamond  Brand ' '  almonds,  29 

Brawley,  Cal.,  112 

Brawley  Cantaloupe  Growers'  Asso- 
ciation, 71 

Brocton   Square  Association,  14" 

Brokers,  33,  55,  61,  97,  98,  100,  101, 
106 

Business  ability  needed,  92 

By-products,  118 

California  Almond  Growers  Ex- 
change, 11,  19,  27,  29,  43,  72,  76, 
77,  86,  89,  94,  IQO 

California  Associated  Olive  Growers, 
Inc.,  11,  72 

California  Associated  Raisin  Com- 
pany, 11,  26,  29,  41,  42,  71,  78, 
79,  91,  92 

California  Avocado  Association,  11 

California  Citrus  Union,  55,  57,  59, 
60,   61,   62,   63 

California  co-operative  marketing  or- 
ganizations, 11 

California  Cultivator,  5,  47 


California  Fresh  Fruit  Exchange,  39, 

40,  67 
California  Fruit  Agency,  53 
California    Fruit    Distributors,    67, 

106,  107,  109,  110 
California   Fruit   Exchange,   11,   19, 

32,  48,  49,  67,  72,  77,  80,  81,  88, 

94,  118 
California  Fruit  Growers  Exchange, 

5,  10,  11,  15,  17,  18,  19,  21,  23, 

25,  26,  28,  32,  34,  39,  49,  52,  72, 

77,  84,  85,  89,  94,  95,  97,  98,  104, 
105,  109,  118,  124,  130 

California  Fruit  Union,  65 
"^  California  Peach  Growers,  11,  43,  72, 

78,  91 

California  Prune  and  Apricot  Grow- 
ers, Inc.,  11,  78,  91 

California  Raisin  and  Fruit  Packing 
Company,  69 

California  Raisin  Growers  and  Pack- 
ers Company,  68 

California  Raisin  Growers'  Associa- 
tion, 40,  41,  42,  68,  69,  71 

California  State  Raisin  Growers  As- 
sociation, 67,  68 

California  Vegetable  Union,  106,  107, 
109,  110 

California  Walnut  Growers  Associa- 
tion, 11,  19,  27,  28,  72,  77,  100 

Canada,  22,  23,  97 

Canneries,   118 

Cantaloupes,  11,  95,  96,  112,  120,  132 

Capital  stock,  75,  76,  77,  78,  79,  80, 
81,  82,  88,  110,  111 

Cartwright  Act,  122 

Chamblin,  T.  H.  B.,  14,  46,  47,  53 

Chicago,  30,  96,  97,  124 

Citrate  of  lime,  118 

Citrus  fruits,  10,  11,  17,  18,  19,  23, 
24,  25,  49,  53,  56,  105,  118,  119 

Claims,  18,  22,  23 


139 


140 


MARKETING  CALIFORNL\  HORTICULTURAL  PRODUCTS 


[140 


Clayton  Amendment,  122 

Coachella  Valley  Date  Growers  As- 
sociation, 11 

Collins,  W.  E.,  17 

Colton,  Cal.,  17,  52,  53 

Columbus,  Ohio,  27 

Commercial  marketing  organizations, 
106,  110 

Commission  system  of  selling  fruit, 
10,  14,  16,  17,  20,  30,  38,  39,  41, 
70,  107 

Conditions  at  time  of  organization, 
37 

Cost  of  marketing,  13,  17,  19,  49,  82, 
110,  117,  118,  119,  123,  126,  129 

Clacking  tests  of  walnuts,  28 

''Culls,'*  disposition  of,  119,  120 

Curtiss,  J.  C,  57 

Cutter,  Geo.  H.,  49 

Daniels,  Joseph  F.,  5 

Dealer   Service  department,   24,   25, 

124 
Deciduous  fresh  fruits,  11,  19,  39,  49, 

66,  96,  106,  118 
Demand  for  product  increased,  23 
''Diamond  Brand''  walnuts,  28,  29 
Distribution,  control  of,  116 
Distribution  of  benefits,  81 
Distribution  of  the  product,  20,  32, 

33,  56,  57,  97,  98,  100,  104,  112, 

114,  123,  129,  130,  131 
Diversion  of  shipments,  33,  99,  107 
Dividends,  81,  82 
Division  sales  managers,  104 
Douglass,  F.  M.,  14 
Duarte-Monrovia  Citrus  Association, 

13 

Economic  waste,  124,  125,  129,  132 

Felts,  G.  W.,  54,  55,  59,  60,  61 
Field  Department,  28,  103 
Financing  the  organization,  74 
Flint,  Mich.,  26 
Florida,  24,  128 
Forsey,  W.  F.,  16 


Freeze  of  1913,  34 
^  Freight  rates,  18,  20,  48,  101,  126 
*  Fresno,  Cal.,  11,  15,  40,  41,  70,  79, 
91 
"From  a  Business  Standpoint,"  97 
Fruit  Exchange  Eeview,  47 
"^  Fruit  Growers  and  Shippers '  Asso- 
ciation, 66,  67 
Fruit  growers'  convention,  40,  69 
Fruit  Growers  Supply  Company,  34 
Fruit    Growers    Union    of    Southern 
California,  52 

General   Sales  Agency   of  America, 

109 
Giffen,  Wylie  M.,  41 
Government  aid  in  distribution,  112, 

131,  132 
Grading  fruit,  28,  29,  30,  117,  119, 

121 
Gravenstein  apples,  30,   97 

Harrigan,  F.  J.,   61 

Imperial  VaUey,  112,  113,  132 
Indian  HUl  Citrus  Association,  103 
Inspection  of  oranges,  99 
Introduction,  9 

Jeffrey,  J.  W.,  69 

Jobbers,  19,  98,  99,  100,  105,  126 

Kearney,  M.  Theo.,  40,  68,  69,  70,  71 

Lemons,  21,  23,  24,  25,  96,  97 

Lettuce,  123,  124 

Liverpool,  30,  97 

Los  Angeles,  11,  32,  39,  52,  53,  94, 

98,  99,  103 
Los  Angeles  Times,  56 
Loyalty,  101 

Manager,  93,  94,  98,  100,  103,  105, 

108 
Membership,  basis  of,  51 
Messenger,  C.  B.,  5 
Middlemen,  121,  122 


141] 


INDEX 


141 


Mississippi  Valley,   129 
Municipal  markets,  127 

Navel  Orange  Co.,   14 
''Near-grade"   walnuts,   29 
New  England,  128 
New  York,  30,  97 

Ocean  freight,  97 

Office  of  Markets  and  Rural  Organ- 
ization, 112,  131,  132 

Olive  growers,  52,  72 

Omaha,  Neb.,  106 

Ontario  Fruit  Association,  14 

Opposition  to  co-operative  organiza- 
tions, 45,  46,  48,  102 

Orange  growers,  10,  11,  16,  21,  42, 
46,  52,  53 

Orange  Growers'  Protective  Union, 
52 

Oranges,  21,  23,  24,  25,  52,  54,  56, 
96,  97,   98,   124 

"Overproduction,"   20,   21 

fPacking,  cost  of,  14,  15 
^Peaches,  dried,  11,  42,  97,  121 

Per  capita  consumption  of  oranges 
and  lemons,  23,  24 

Pittsburgh,   124 

Pomona,  Gal.,  14 

Pomona  Valley,  17,  38 

Pool  cars,  101 

Pooling  of  the  product,  33,  43 

Population  of  the  United  States, 
rate  of  increase,  23 

Porto  Rico,  24 

Possibility  of  marked  improvements, 
44 

Powell,  G.  Harold,  5,  17,  49 

Preface,  5 

Prices  of  horticultural  products,  121, 
122,  126,   131 

Principles,  fundamental,  of  co-oper- 
ative  marketing,    35 

Producers'  Raisin  Packing  Company, 
16 

Production,  control  of,  114 


Protection  of  the  individual  grower, 

30 
Prunes,  97 


Raisin  bread,  26,  27 

Raisins,  11,  16,  26,  27,  29,  40,  41, 
42,  68,  97,  121 

Recipe  books,  24 

''Red  ink,"  37,  39,  41 

Redlands,  Cal.,  17 

Reducing  the  cost  to  the  consumer, 
26,  122,  123 

Reserve  or  surplus  fund,  74,  81,  82, 
110,  111 

Retail  dealer,  25,  123,  124,  125,  126 

Ripley,  E.  P.,  62 

Riverside,  Cal.,  53 

Riverside  Daily  Press,  5,  62 

Riverside  Fruit  Exchange,  17 

Riverside  Heights  Orange  Growers 
Association,  14,  15 

Riverside  Orange  Growers  and  Pack- 
ers Protective  Association,  52 

Riverside  Orange  Trust,  52 

Riverside  Press  and  Horticulturist, 
5,  53 

Rural  Califomian,  5 

Sacramento,  11,  40,  66,  106 

Salaried  agents,  32,  33,  82,  97,  106, 
109,  128 

San  Bernardino  County  Fruit  Ex- 
change, 59 

San   Francisco,   11,  43,   70 

San  Gabriel  Valley  Potato  Growers' 
Association,  108 

San  Joaquin  Valley,  42 

Santa  Ana,  Cal.,  109 

Sebastopol,  Cal.,  11,  95,  96 

Sebastopol  Apple  Growers'  Union, 
11,  29,  76,  82,  97 

Sebastopol  Berry  Growers,  Incorpor- 
ated, 11,  76 

Selling,  methods  of,  95,  99,  100 

Sherman  Anti-Trust  Act,   122 

Simpson,  T.  M.,  61 

Southern  California  Fruit  Exchange, 


142 


MARKETING  CALIFORNIA  HORTICULTURAL  PRODUCTS 


[142 


10,  16,  45,  47,  48,  54,  55,  56,  58, 
59,  63,  64,  65,  67,  77,  85 

Southern  California  Fruit  Ex- 
changes, 46,   53 

Southern  California  Pomological  So- 
ciety, 14 

Speculative  buyers,  9,  30,  41,  42,  43 

Spoilage,  123,  124,  127 

Standardization  of   the  product,   27 

Standard  packages,  28 

State  Board  of  Horticulture,  40 

Stubenrauch,  A.  V.,  5 

"Sunkist"  brand,  28 

Sun-Maid  Herald,  80 

'* Sun-Maid*'  raisins,  29 

Supplies,  purchase  of,  34,  111 

Supply  and  demand,  117,  121,  122 

Telegraphic  service,  32,  98,  104,  106, 
112 

Thompson,  C.  C,  53 


Traffic  department,  18 
Transportation  service,  improvements 

in,  22 
Truck-producing  areas,  129 
Turlock,  Cal.,  11,  43 
Turlock     Merchants    and     Growers, 

Inc.,  11,  30,  43,  72,  81,  94 

Uprooting  of  vineyards,  40,  68 

Vegetables,  106,  107,  124,  125 
Volume  of  product  needed,  48 
Voting,  basis  of,  83 
Voting  trust,  72,  78,  91,  92 

Walnuts,  11,  20,  28,  29,  96,  100,  101 
Watsonville  Apple  Distributors,  11 
Wilkinson,  R.  H.,  61 
Woehlke,  Walter  V.,  42 
Woodford,  B.  A.,  15,  17 


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